Friday Snippets

May 18, 2018

Icahn Adds Two Nominees for Sandridge’s Board

The activist investor has put forth a former Icahn Capital managing director and the head of John Corzine’s family office as board nominees.

Carl Icahn is expanding the number of directors he is nominating to the board of Sandridge Energy from five to seven. The move is in response to the shale oil producer’s announcement on May 4 that it would expand its board from five to seven. In a new regulatory filing, the investor said he is now also nominating Jonathan Christodoro, a private investor who served as a managing director of Icahn Capital from July 2012 to February 2017. and Nancy Dunlap, private counsel and head of the private family office of former New Jersey governor and U.S. Senator Jon Corzine. In late December, Sandridge agreed to cancel its deal to acquire Bonanza Creek Energy due to pressure from Icahn.

Using OseFrac, we took a look at the Coy City Ranch B Unit in Karnes County, one of Marathon’s recent fracs in the Eagle Ford.

From OseFrac, we are able to see that this specific well used a higher than average amount of proppant. Want to compare this well with others in the area? Try it out for yourself!

US shale drillers still struggle to deliver positive cash flow

Even with oil prices around $70 per barrel, the top 20 US shale oil producers collectively spent nearly $2 billion more than they generated in the first quarter as bad hedges, labor and material shortages and transportation bottlenecks weighed on cash flows, according to an analysis of FactSet data. The rush to hedge production when crude prices hit $50 to $55 per barrel last year is now preventing drillers from capitalizing on the oil price rally and could reduce revenues for six Permian Basin-focused drillers by 7% this year, according to Wood Mackenzie.

Widening WTI-Dubai crude spread seen boosting US oil exports

West Texas Intermediate crude’s discount to Middle East benchmark Dubai reached $3.21 per barrel on Tuesday, its widest level since December, as growing inventories in Cushing, Okla., and surging US output weigh on US oil prices. However, WTI’s weakness along with the prospect of reduced Iranian exports could encourage Asian buyers to purchase more American barrels.

EIA REPORT SUMMARY

The U.S. Energy Information Administration reported Wednesday that crude supplies declined by 1.4 million barrels for the week ended May 11 versus the American Petroleum Institute on Tuesday reporting a rise of nearly 4.9 million barrels.

Analysis of the EIA Data

Crude Oil: The federal government’s EIA report revealed that crude inventories fell by 1.4 million barrels for the week ending May 11, following a decrease of 2.2 million barrels in the previous week. The analysts surveyed by S&P Global Platts – the leading independent commodities and energy data provider – had expected crude stocks to go down some 2.3 million barrels.

Soaring exports in the wake of widening Brent premium to WTI led to the draw with the world’s biggest oil consumer. This was partly offset by record high domestic production, which restricted the decline below expectations.

In particular, U.S. output rose by 20,000 barrels per day last week to more than 10.72 million barrels per day – the most since the EIA started maintaining weekly data in 1983. In early February, oil production broke through the 10 million barrels a day threshold for the first time in nearly 50 years and has maintained the record levels thereafter.

Meanwhile, stockpiles have shrunk in 40 of the last 58 weeks and are down nearly 90 million barrels in the past year. The gradual fall has helped the U.S. crude market shift from year-over-year storage surplus to a deficit. At 432.4 million barrels, current crude supplies are 17% below the year-ago period and are in the bottom half of the average range during this time of the year.

However, stocks at the Cushing terminal in Oklahoma – the key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange – edged up by 53,000 barrels to 37.2 million barrels.

The crude supply cover was up from 26.0 days in the previous week to 26.1 days. In the year-ago period, the supply cover was 30.5 days.

OIL AND GAS PRICES

Oklahoma crude oil prices as of 5 p.m. Thursday:

Oklahoma Sweet:
Sunoco Inc. — $68
Oklahoma Sour:
Sunoco Inc. — $56

Brent crude oil on Thursday topped $80 a barrel for the first time since November 2014, as the market grew concerned that the Trump administration’s effort to sanction Iran’s crude exports could be more successful than originally thought.

July Brent, the international benchmark for oil prices, hit a session high of $80.50 a barrel on Thursday, its strongest level since Nov. 24, 2014, when it topped out at $80.85. The contract eased back to close at $79.30, up 2 cents.

July U.S. West Texas Intermediate crude ended the day plus 1 cent from the previous session, closing at $71.57 a barrel.

NAT GAS NEWS

The EIA reported a +106 Bcf change in storage for the week ended May 11. This brought storage to 1.538 Tcf. This compares to the +68 Bcf change last year and +87 Bcf change for the five-year average.

Going into this storage report, a Reuters survey of traders and analysts pegged the average at 105 Bcf with a range of +99 Bcf to +118 Bcf.

June natural gas NGM18, closed Thursday at $2.859 per million British thermal units.

52WK RANGE
$2.550 – $3.020

OklahomaMinerals.com announces a new evaluation tool for mineral owners, called SimplePetro. This tool enables mineral owners to obtain a report on their producing mineral interest at no cost, using a web-based petroleum economics and cash flow evaluation program that allows users to calculate a range of values in just 10 clicks. Click here to try it: http://bit.ly/2po77Fj

Closing Thought: There is a tide in the affairs of men, which taken at the flood, leads on to fortune. Omitted, all the voyage of their life is bound in shallows and in miseries. On such a full sea are we now afloat. And we must take the current when it serves, or lose our ventures. ~William Shakespeare

Have a great weekend from Oklahoma Minerals!

Talk soon,
Gib Knight

Friday Snippets

EPIC Midstream secures partnerships for Permian pipeline

EPIC Midstream Holdings has struck agreements with Apache Corp. and Noble Energy for capacity on the 730-mile EPIC Crude Oil Pipeline running from the Permian Basin to Corpus Christi, Texas. The two producers have committed to 30% of the pipeline’s planned capacity of 590,000 barrels per day, and they also have the option to acquire stakes in the pipeline.

Commentary: Oil-gas price divergence continues

A historically narrow price gap between US crude oil and natural gas has widened because supply-demand dynamics have changed since the financial crisis, writes Owain Johnson of CME Group. “A greater focus on international exports for both crude oil and natural gas could help align their prices once more,” he writes.

Gas output in N.D. breaks record in March while oil production dips

North Dakota drillers pumped a record 2.1 billion cubic feet of natural gas per day in March, with companies capturing 89% of the gas, according to the state’s Department of Mineral Resources. Meanwhile, preliminary data show North Dakota oil production fell 1% to 1.16 million barrels per day in March, but Director of Mineral Resources Lynn Helms expects June oil production to break the 1.2-million-barrel-per-day record set in December 2014.

Bakken producers brace for tougher flaring rules in N.D.

Insufficient natural gas midstream infrastructure may force Bakken Shale drillers to scale back production to comply with North Dakota’s upcoming flaring rules, which will require operators to capture 88% of gas produced from their wells — up from 85% now — starting in November. Natural gas production in the state hit an all-time record of 2.1 billion cubic feet per day in February.

LNG Canada aims to begin work on LNG export project this year

LNG Canada plans to begin construction on its $31.1 billion liquefied natural gas export facility on British Columbia’s northern coast this year, said CEO Andy Calitz. LNG Canada delayed a final investment decision on the project in 2016 due to adverse market conditions.

Permian bottlenecks drive shale producers away

Oilfields including North Dakota’s Bakken, Oklahoma’s Cana Woodford and South Texas’ Eagle Ford formations are seeing a surge in investment as pipeline bottlenecks and labor and materials shortages in the Permian Basin prompt shale drillers to explore alternatives. EOG Resources saw production rise 15% in the first quarter while profits were up over 2,000% from a year earlier, a performance the company attributed to its diversified portfolio, which includes assets in the Permian Basin as well as Wyoming, Colorado, Oklahoma and North Dakota.

ConocoPhillips looks to Eagle Ford, Bakken amid Permian constraints

Infrastructure constraints in the Permian Basin are encouraging ConocoPhillips to look elsewhere for growth opportunities, particularly in the Eagle Ford Shale and Bakken Shale, but also in the Austin Chalk play in Louisiana. “The cost structure is lower, and we’re not seeing the sort of rapid inflation you’re seeing in the Permian,” said ConocoPhillips Chairman and CEO Ryan Lance.

Oil majors look downstream in search of better profits

Oil giants including ExxonMobil, BP and Royal Dutch Shell are stepping up investments in downstream assets such as gas stations, processing plants and refineries, enticed by the opportunity to boost profits and expand their customer bases. Even though today’s high crude prices are putting downward pressure on refining margins, oil majors are convinced their downstream investments will pay off regardless of the trajectory of crude prices.

May 11, 2018

SandRidge Posts Loss of $41 Million

SandRidge Energy, in the middle of a proxy battle with its largest shareholder, billionaire Carl Icahn, on Tuesday reported first-quarter production dropped year-over-year, and the company recorded a net loss.

The Oklahoma City, Okla.-based company reported a first-quarter net loss of $40.89 million, compared to profit of $50.81 million one year ago.

For the three months ended March 31, the independent producer reported its oil production dropped to 926,000 barrels, from 1.13 million barrels (MMBbl) in the year-ago quarter.

SandRidge produced 35,600 barrels of oil equivalent per day in the first quarter, down from 44,200 daily in the year-ago period.

Natural gas liquids production for the quarter fell to 700,000 Bbls, from 887,000 Bbls during the first quarter of 2017. Natural gas production dropped to 9.49 billion cubic feet (Bcf), from 11.77 Bcf.

The first-quarter loss translates to $1.18 a share, or $1.90 a share, in the year-ago period. Adjusted for one-time items, the company generated a profit of $5.3 million, or 15 cents a share, compared to $20.9 million, or 78 cents a share one year ago.

The quarter included a $32 million payout related to the firing of then-CEO James Bennett, Chief Financial Officer Julian Bott and the layoff of 80 employees, or about 20 percent of the company’s workforce. The expense was composed of $19 million in cash and $13 million in stock to the former executives and employees. About $21.1 million of the payout went to the two former executives, the company said.

NewsOK.com reported that SandRidge executives said they will continue to focus on the NW STACK and Niobrara basins but also plan to drill four new wells in northwest Oklahoma’s Mississippi Lime play. SandRidge’s 1,100 Mississippi Lime wells still represent about 90 percent of SandRidge’s production even though the company has not recently drilled in the area.

The company operated one rig each in Q1, in Oklahoma’s NW STACK and Colorado’s Niobrara Basin.

Saudi Arabia will ‘mitigate’ supply shortages

Global oil supplies were already getting tight before Trump vowed on Tuesday to exit the Iran nuclear deal and impose “powerful” sanctions on the OPEC nation.

CNN is reporting that OPEC kingpin Saudi Arabia indicated it was ready to act. In a statement late Tuesday, the Saudi energy ministry said was “committed to supporting the stability of oil markets.”

“The kingdom [will] work with major producers within and outside OPEC, as well as major consumers, to mitigate the impact of any potential supply shortages,” the official Saudi Press Agency said, citing a statement from the ministry.

But there’s another major question: Will tensions in the Middle East rise even further now that the United States is leaving the Iran deal? Heightened geopolitical fears in the Middle East often raise prices.

Several US military officials told CNN that there are increasing concerns Iran is on the cusp of an attack against Israel. It’s not clear when an attack could come, nor what form it could take.
“The three or four-year period of quiet in terms of geopolitics impacting oil markets is over,” said Canary’s Eberhart.

Private oil investments swell as Wall Street wanes

Collin Eaton | Houston Chronicle | Wednesday, May 9, 2018

Oil companies collected more spending money from private equity firms than Wall Street investors in the first quarter, a new report shows.

Private firms made 33 new investments in the oil industry in the first three months of the year. Firms disclosed the size of only 17 of the investments, and those came in at $8.3 billion, according to Houston adviser Petroleum Listing Service, or PLS Inc.

By comparison, oil companies raised $6.1 billion in 24 public offerings. That’s down from almost $15 billion in 40 offerings in the previous quarter – a sign of Wall Street’s waning interest in the energy sector.

Samson sells certain Wyoming assets for $44.4 million

Samson Resources II LLC, Tulsa, has agreed to sell a portion of its position in Converse County, Wyo., to an undisclosed buyer in a cash and acreage deal.

The agreement calls for Samson to sell 7,000 net acres, interests in 17 wells, and overriding royalty interests in assets it deems noncore to its portfolio. In return, Samson will receive $4.4 million in cash and 15,000 net acres. The acreage will include all depths below the Fort Union formation, is currently undedicated, and will bolt-on to Samson’s core acreage position in Johnson County, Wyo.

The company is divesting noncore assets and increasing focus on core assets in the Powder River and Green River basins of Wyoming, said Joseph Mills, Samson president and chief executive officer. Proceeds will be used to partially fund the company’s 2018 drilling program, he said.

After closing, expected before May 31, Samson will own rights to more than 152,000 net acres in the Powder River basin.

EIA REPORT SUMMARY

U.S. crude oil, gasoline and distillate stockpiles fell more than expected last week, as crude imports dropped sharply.

The U.S. Energy Information Administration reported Wednesday that crude supplies fell by 2.2 million barrels for the week ended May 4. The decline followed back-to-back weekly increases. Analysts surveyed by S&P Global Platts had forecast a decline of 400,000 barrels, while the American Petroleum Institute on Tuesday reported fall of nearly 1.9 million barrels, according to sources. Gasoline stockpiles also declined by 2.2 million barrels for the week, while distillate stockpiles dropped 3.8 million barrels, according to the EIA. The S&P Global Platts survey forecast supply declines 600,000 barrels for gasoline and 1.9 million barrels for distillates stockpiles.

The decline in inventories came as net crude imports dropped by nearly 1 million barrels per day to 5.4 million bpd, the lowest one-week figure since late February.

The fall in crude stocks came even as refinery activity slowed in the most recent week and crude production hit a fresh record of 10.7 million bpd. Weekly crude output figures are variable, however, and are often adjusted in monthly data that lags by several weeks.

“This may one of the most bullish reports that I have surveyed – even with domestic production rising to 10.7 million bpd,” said John Kilduff, partner at energy hedge fund Again Capital LLC in New York.

Crude stocks at the Cushing, Oklahoma, delivery hub for U.S. crude futures rose by 1.4 million barrels, EIA said.

Crude prices ended the session slightly higher on Thursday as investors weighed the potential disruption to oil flows from major exporter Iran in the face of US sanctions.

The market also contended with concerns about Venezuela’s crude production slipping further and with bullish drawdowns in US crude inventories.

Brent crude could return to $100 a barrel next year, or even sooner, Bank of America said, due to the ongoing collapse of Venezuelan output and risks to Iranian crude exports. The bank also lifted its average Brent forecast to $70 for this year and $75 in 2019.

Brent crude futures settled 26 cents, or 0.3 per cent, higher at $77.47 a barrel, after earlier hitting $78, the highest since November 2014. US West Texas Intermediate settled up 22 cents at $71.36.

NAT GAS NEWS

The U.S. Energy Information Administration reported Thursday that domestic supplies of natural gas rose by 89 billion cubic feet for the week ended May 4. Analysts surveyed by S&P Global Platts had forecast a climb of 92 billion cubic feet and on average over the last five years for the same week, inventories rose by 69 billion cubic feet. Total stocks now stand at 1.432 trillion cubic feet, down 863 billion cubic feet from a year ago, and 520 billion below the five-year average, the government said.

June natural gas NGM18, closed Thursday at $2.814 per million British thermal units.

52WK RANGE
$2.550 – $3.020

OklahomaMinerals.com announces a new evaluation tool for mineral owners, called SimplePetro. This tool enables mineral owners to obtain a report on their producing mineral interest at no cost, using a web-based petroleum economics and cash flow evaluation program that allows users to calculate a range of values in just 10 clicks. Click here to try it: http://bit.ly/2po77Fj

Closing Thought: “Those who are crazy enough to think they can change the world usually do.” ~Steve Jobs

Have a great weekend from Oklahoma Minerals!

Talk soon,
Gib Knight

Friday Snippets

Technology, higher oil prices make Bakken drilling more lucrative

Tech advancements and strong crude prices have helped bring down break-even costs on top-quartile wells in North Dakota’s Bakken Shale to a range of $41 to $50 per barrel, according to a Bloomberg New Energy Finance report. BNEF analyst Jacob Fericy expects all average Bakken wells to be profitable as long as US crude prices stay above $63 per barrel, although persistent infrastructure constraints could hinder production growth.

Enterprise Products, ETP team up on Permian gas pipeline projects

Enterprise Products Partners and Energy Transfer Partners unveiled plans to reopen the idled Old Ocean natural gas pipeline connecting North Texas to Brazoria County on the Texas coast in the second quarter, as well as expand their jointly owned North Texas pipeline by the fourth quarter. “Bringing the Old Ocean pipeline back into service will help meet the immediate demand for takeaway capacity from the growing Delaware Basin and Midland Basin,” said Enterprise Products Director and CEO Jim Teague.

Marathon Oil amasses acreage position in Austin Chalk

Marathon Oil said that in the past year, it has acquired more than 250,000 net acres in several new plays, among them a “largely contiguous” position in the Louisiana Austin Chalk. “Critical to our long-term value creation and full-cycle returns, we captured future potential opportunities through low-cost exploration acreage additions, including a material position in the emerging Louisiana Austin Chalk play,” Marathon Oil President and CEO Lee Tillman said.

Enbridge divests assets in debt-reduction effort

Enbridge is offloading $2.5 billion worth of assets to help it pay off the $14.5 billion in debt it built up with last year’s $28.6 billion acquisition of Spectra Energy. The company has reached agreements to sell its Midcoast Operating natural gas midstream business to ArcLight Capital Partners for $1.12 billion as well as some renewable-power assets to the Canada Pension Plan Investment Board for $1.36 billion.

Pa. Court Grapples With Proof Behind $1M Fracking Fine

As part of an ongoing dispute over a $1.1 million fine levied against an EQT Corp. unit for hydraulic fracturing fluid that leaked from an in-ground impoundment, a Pennsylvania appeals court wrestled during oral arguments on Wednesday over how to prove whether soil-bound contaminants had moved into groundwater.

Companies sign contracts for deepwater wells in Mexico

Oil companies have signed 19 deepwater exploration contracts with Mexico, committing to 23 wells and a potential investment of $93 billion. The contracts, awarded in a bidding round in January, include nine areas in the Salina del Istmo Basin, six in the Perdido fold belt and four in the Mexican Ridges.

May 4, 2018

Great Salt Plains Midstream Holdings, LLC (“GSPM”) recently closed on its acquisition of Thunderbird Midstream LLC. Both firms have headquarters in Oklahoma City.

The acquired assets include the Thunderbird Midstream cryogenic natural gas plant with 20 million cubic feet of natural gas per day (MMcf/d) processing capacity. The plant began operations in 2016 and is located on more than 40 acres to allow for expansion to meet increased demand.

The transaction includes a 34 mile natural gas pipeline gathering system. The acquisition continues the buildout of GSPM’s infrastructure in the prolific STACK play of northwestern Oklahoma.

“We are adding to our system to serve multiple producers in the northwest portion of the STACK,” said Rusty Rains, CEO of GSPM. “We are now offering immediate natural gas processing services. The additional gathering pipeline from Thunderbird extends our system west into Major County, providing producers with low pressure gathering and additional residue market optionality.”

GSPM also has a state-of-the-art cryogenic processing facility under construction in Major County, Oklahoma, called the Silver Lake Plant, which will have an initial capacity to process up to 70 MMcf/d, with expansion capacity of up to 220 MMcf/d. Additionally, GSPM is constructing over 90 miles of natural gas gathering pipelines and multiple compressor stations and expects the new facilities to be in service in July 2018.

Saudi Aramco appoints first woman to board

Saudi Aramco, the world’s most profitable company, has appointed a woman to its board, in a milestone move for Saudi Arabia, where only one-fifth of women work and there are very few female executives.

The oil company, which made profits of $33.8bn (£25bn) in the first half of 2017 – $5bn more than second-placed Apple – said on Sunday it had recruited the American oil executive Lynn Laverty Elsenhans to its 11-member board.

The appointment of Elsenhans, a former chief executive and chair of US oil refiner Sunoco, comes as the Saudi Arabian government prepares to float Saudi Aramco later this year or early in 2019. The initial public offering, which could take place in London, New York or Hong Kong, will be the world’s largest.

Only a handful of Saudi women are appointed to the board of major Saudi companies, but that is slowly changing in the conservative kingdom, where women are subject to a male guardianship system that in many cases restricts their opportunities to work. The Saudi government has set a target of increasing female participation in the workforce from 22% to 30% by 2030.

Last year, the Saudi stock exchange appointed Sarah al-Suhaimi as its first female chair. She was the first woman to chair a major government financial institution in the kingdom.

Elsenhans was named by Forbes magazine as one of the world’s most powerful women in 2008. Prior to her role at Sunoco, Elsenhans was a senior executive at Royal Dutch Shell, where she worked for more than 28 years. She also sits on the board of GlaxoSmithKline.

Also joining Aramco’s board are the Saudi Arabian minister of finance, Mohammed al-Jadaan; the economy minister, Mohammed al-Tuwaijri; Peter Cella, the former president and chief executive of Chevron Phillips Chemicals; and Andrew Liveris, the chief executive of the Dow Chemical Company.

The five new members of Aramco’s board will join six returning members, including the Saudi energy minister, Khalid al-Falih, who is also Aramco’s chairman, and Amin Nasser, Aramco’s chief executive. Ibrahim al-Assaf, a minister of state, and the managing director of the government-owned Public Investment Fund, Yasir al-Rumayyan, also remain on the board.

Marathon Oil amasses acreage position in Austin Chalk

Marathon Oil has acquired more than 250,000 net acres in several new plays, among them a “largely contiguous” position in the Louisiana Austin Chalk at a cost of less than $900 per acre. “Critical to our long-term value creation and full-cycle returns, we captured future potential opportunities through low-cost exploration acreage additions, including a material position in the emerging Louisiana Austin Chalk play,” Marathon Oil President and CEO Lee Tillman said.

ConocoPhillips also recently announced its position in Louisiana’s portion of the Austin Chalk formation, which stretches across Texas through the middle of Louisiana. The formation had little leasing activity here for two decades until the past year or so when EOG Resources announced last fall it had lease 130,000 acres and drilled a test well.

Kirk Barrell, president of New Orleans-based Amelia Resources, said his firm sold 85,000 acres of leases in the Austin Chalk play to Conoco in December for $87 million. Since then, interest in Amelia’s additional 360,000 acres has increased significantly. He said EOG is continuing to lease. Conoco’s exploratory wells are expected to be in East and West Feliciana parishes.

PetroQuest Energy from Lafayette is another company that has announced lease purchases in Louisiana’s portion of the Austin Chalk. Briggs said Redhawk Holdings Corp. and Blackbrush Oil and Gas also have positions in Louisiana.

It remains too early to tell whether the recent activity will spur a resurgence of onshore drilling in Louisiana and whether it will extend across the state. So far, the exploratory well from EOG only provides insight into the area around Avoyelles Parish. But Briggs said leasing also is picking up west of Avoyelles in the larger Master’s Creek and Brookeland fields in central and western Louisiana. Those fields hold the keys to boosting the state and region’s economy, he said.

One of the challenges facing the Austin Chalk is that the formation is more difficult to drill in Louisiana than in Texas, Briggs said. That’s the biggest thing that will “keep us from becoming Texas,” he said, as drillers have to work harder to find suitable areas of the formation for drilling.

Range eyes asset sales, continues Marcellus focus

Independent producer Range Resources may attempt to sell its Louisiana production assets this year as the company continues to shift its focus to stronger results and increased takeaway from Appalachia.

Range already has processes underway to sell some “underappreciated inventory” in its portfolio in order to lower the company’s debt and move it towards an “investment-grade leverage profile,” chief executive Jeffrey Ventura said on the company’s first quarter earnings call today.

Ventura stopped short of naming which assets Range is considering selling, but in February he said Range’s north Louisiana assets were “more geologically complex” than anticipated and portions of it were less productive than expected. The company then announced it would slow its activity there to one rig and one fracturing crew and allocate about 85pc of its 2018 capital budget to the Marcellus shale in Appalachia.

The producer’s outlook on Marcellus production remains strong. Favorable basis pricing in the midcontinent and northeast amid cold weather provided a 13¢/mmBtu price differential to the Henry Hub during the first quarter. Range is currently selling about 1.4 Bcf/d (40mn m³/d) of natural gas in the southwest part of the Marcellus.

Range’s takeaway capacity on the Energy Transfer Rover pipeline represents the final firm transportation commitment still on hold for the producer, and Range expects to fill that capacity by the fourth quarter of this year, Ventura said. When Rover’s full capacity of 3.25 Bcf/d begins, Range will shift its current capacity on Dominion Transmission over to Rover in order to meet demand in the midcontinent.

Range’s first quarter production reached 2.19 Bcf/d of natural gas equivalent (Bcfe/d), up by 13pc on the year and exceeding its guidance of 2.18 Bcfe/d. The producer’s realized price including hedging averaged $3.58/1,000 cf, up by 12pc on the year. Range’s capital spending budget remains at $941mn for the year, with 85pc directed towards the Marcellus.

EIA REPORT SUMMARY

The U.S. Energy Information Administration said crude supplies rose 6.2 million barrels for the week ended April 27. Analysts surveyed by S&P Global Platts had forecast a climb of 1.8 million barrels, while the American Petroleum Institute on Tuesday reported an increase of 3.4 million barrels. Gasoline stockpiles also climbed by 1.2 million barrels for the week, while distillate stockpiles fell by 3.9 million barrels, according to the EIA. The S&P Global Platts survey forecast a supply decline of 1 million barrels for gasoline, while distillates stockpiles were expected to be down by 1.3 million barrels.

Inventories at the Cushing, Oklahoma storage hub climbed by about 152,000 barrels in the week to May 1, according to market intelligence.

Oil finished higher Thursday for a second day, as traders worried that a potential U.S. withdrawal from the Iran nuclear agreement, and the International Monetary Fund’s threat to expel Venezuela, will lead to tighter global crude supplies.

June West Texas Intermediate crude oil CLM18, rose 50 cents, to settle at $68.43 a barrel on the New York Mercantile Exchange. International benchmark

Natural-gas futures logged their lowest settlement in two weeks after the U.S. government reported the first weekly natural-gas supply climb of the year.

June natural gas NGM18, closed Thursday at $2.726 per million British thermal units.

52WK RANGE
$2.550 – $3.020

OklahomaMinerals.com announces a new evaluation tool for mineral owners, called SimplePetro. This tool enables mineral owners to obtain a report on their producing mineral interest at no cost, using a web-based petroleum economics and cash flow evaluation program that allows users to calculate a range of values in just 10 clicks. Click here to try it: http://bit.ly/2po77Fj

Closing Thought: Until we can manage time, we can manage nothing else.” — Peter Drucker
Have a great weekend from Oklahoma Minerals!

Talk soon,
Gib Knight

Friday Snippets

Bottlenecks put Permian production growth at risk

Midstream export capacity constraints and well completion service bottlenecks threaten to slow production in the Permian Basin and raise costs for drillers. “It is our view that the market is missing the extent to which Permian infrastructure constraints will limit total US production growth as actions such as gas flaring will likely be insufficient to alleviate growing pains,” Cowen analysts wrote in a recent report.

Ohio court rules city’s anti-fracking measure must be included on ballot

The Ohio Supreme Court this week ruled an initiative to ban hydraulic fracturing in Youngstown, Ohio, must be placed back on the May ballot. The court said the Mahoning County Board of Elections exceeded its authority by rejecting the measure.

Oil majors rein in spending despite cash bonanza

ExxonMobil, Chevron and Royal Dutch Shell reported first-quarter combined profits of $16.8 billion, the highest since 2014, but production gains during the quarter were limited in a sign that oil majors are maintaining their focus on capital discipline amid pressure from investors. The biggest oil and natural gas firms only increased their drilling budgets by 7% since last year despite a 50% rise in oil prices over the same period, according to Wood Mackenzie.

Jones Day Leads Marathon In $23.3B Andeavor Buy

Marathon Petroleum Corp., led by Jones Day, said Monday it will buy out Texas-based Andeavor, advised by Sullivan & Cromwell LLP, in a $23.3 billion cash-and-stock deal, bringing together the second-largest U.S. refiner and a highly integrated marketing, logistics and refining company.

Hess stepping up drilling in the Bakken

US independent producer Hess aims to accelerate drilling in the core Bakken Shale, with plans to increase its rig count from four to six by the end of the year. Hess saw Bakken production rise 12% to 111,000 barrels of oil equivalent per day in the first quarter of 2018 from the same period last year.

Permian’s oil sector continues to expand

The Texas Permian Basin Petroleum Index was up 28.9% year-on-year in February in a sign that drilling activity in the basin continues to strengthen, according to Karr Ingham, the economist who calculates the index. February crude production rose 19.5% over the same month last year, while the average rig count showed an increase from 252 in February 2017 to 348 in February 2018.

West Texas economy enjoys rebound amid drilling boom

The oil price rally and shale drilling boom in the West Texas oil patch are spurring an economic revival in the region, adding employment opportunities, driving record salaries, increasing the cost of living and encouraging more spending. Unemployment in the Texas cities of Odessa and Midland was at 3.2% and 2.5% respectively in February, but the biggest challenge for local businesses, including restaurants, oil companies and general contractors, remains finding and retaining workers.

Energy firms team up to build supertanker capability at Texas port

Phillips 66 Partners, Buckeye Partners and Andeavor have joined forces to build a terminal that can handle very large crude carriers at the Port of Corpus Christi in Texas, with operations expected to begin next year. Dubbed the South Texas Gateway Terminal, the facility will be equipped with two deepwater docks and 3.4 million barrels of oil storage.

Slawson To End North Dakota Drilling Suit After Permit Win

Slawson Exploration Co. Inc. on Thursday notified a North Dakota federal court it was ending its suit against the U.S. Department of the Interior after an administrative hearing favored the company and allowed it to continue oil and gas drilling in the state in the face of a challenge by the Mandan Hidatsa and Arikara Nation.

April 27, 2018

Hedge funds are making big bets on oil going higher

Money managers have amassed close to record long positions in the six-major oil-linked futures and option contracts, and the ratio of longs to shorts is even higher than when it was when hedge fund managers held a record net long position in oil back in January, suggesting that they have never been so convinced that oil prices will increase in the short term.

In the six most important petroleum contracts, money managers held long to short positions in a ratio of nearly 14:1 for the week ended on April 20, compared to a 12:1 ratio at January 23, when portfolio managers held the record net long position in oil — 1.484 billion barrels, Reuters market analyst John Kemp writes.

The extremely lopsided positioning could lead to a sharp oil price correction if and when the money managers try to close some of the open long positions, according to Kemp.

Yet there are some signs supporting the view that oil prices could rise—global oil inventories are almost down to their five-year average and demand growth is still seen robust despite the higher oil prices. A number of geopolitical concerns ranging from Venezuela’s collapse to potential sanctions on Iran to possible flare-up of the conflicts in Syria and Yemen are also driving up prices.

At this point, the market participants will be looking to see if higher oil prices could start hurting demand growth, which has been strong enough to help OPEC’s mission in drawing down the global oil overhang. The other supply-demand fundamental to watch would be how much new U.S. and other non-OPEC supply comes to the market with the higher oil prices.

US crude exports hit another record

US crude exports climbed to a 25-year high of 2.33 million barrels per day last week, bringing the average for this month to 1.76 million barrels per day, according to the Energy Information Administration. Export volumes above 2 million barrels per day should become the new normal this summer as the widening price gap between West Texas Intermediate and Brent spurs demand for US oil. The EIA also reported that U.S. crude output jumped to 10.6 million barrels a day.

As long as Permian production remains strong, that WTI “discount should remain and then you definitely should still see strong demand for exports,” said Joseph Bozoyan, a portfolio manager at Manulife Asset Management LLC in Boston.

Earlier this month, WTI traded at the biggest discount to its global counterpart since January. Signs that the spread will widen further through the year will help boost exports as traders may take advantage of cheaper U.S. oil.

Oklahoma Completion Filings – Data provided by Oseberg.io

From Bloomberg Markets: Permian Basin Is Growing Into the Largest Oil Patch in the World

The Permian shale play is all about setting records. Now, the region may even become the world’s largest oil patch over the next decade.

Output in the basin is forecast to reach 3.18 million barrels a day in May, according to the Energy Information Administration. That’s the highest since the agency began compiling records in 2007. By 2023, the basin may produce 4 million barrels a day, according to the International Energy Agency. The Ghawar field in Saudi Arabia is currently the world’s biggest oil field, with capacity of 5.8 million barrels a day, according to a 2017 EIA report. #energy #bloomberg #forecasting #shale

Oklahoma Suffers Its 2,724th Earthquake Since 2010

From Livescience.com -By Stephanie Pappas, Live Science Contributor

A cluster of earthquakes in Oklahoma earlier this month helped push the state to 62 temblors this year alone of magnitude 3.0 or more — and 2,724 of that magnitude or more since 2010.

This year is on track for a huge decline from the peak of Oklahoma’s restlessness in 2015, when the state felt a staggering 903 quakes of magnitude 3 or greater. But it’s also a far cry from Oklahoma’s norm before 2009, when the state recorded an average of one or two magnitude 3.0 or more earthquakes each year.

LNG flows through Panama Canal to increase fivefold by 2020

Liquefied natural gas volumes crossing the Panama Canal could increase fivefold to more than 33 million tons per year by the end of 2020, according to Panama Canal Authority CEO Jorge Quijano. Meanwhile, US LNG exports through the canal could jump from an expected 12.1 million tons this year to roughly 22 million tons in 2019.

Demand for LNG has risen significantly in the last three years as the increase of supply, especially from onshore shale fields in the United States and offshore reserves in Australia, has made it more competitive. Many countries including China have also been switching to gas more rapidly than expected, away from dirtier coal, for environmental reasons.

Shipments of LNG through the Panama Canal began to rise after a third set of locks was added in 2016, and the authority projects growing demand for the supercooled fuel will boost such transits through the early part of the 2020s.

The Canal is already looking beyond the next few years to adding a fourth set of locks, which would serve a new generation of even bigger ships.

EIA REPORT SUMMARY

The U.S. Energy Information Administration said crude supplies rose unexpectedly by 2.2 million barrels for the week ended April 20. Analysts had forecast a decline 1.1 million barrels, while the American Petroleum Institute on Tuesday reported an increase of 1.1 million barrels. Gasoline stockpiles grew by 800,000 barrels for the week, while distillate stockpiles fell 2.6 million barrels, according to the EIA. The S&P Global Platts survey forecast a supply decline of 500,000 barrels for gasoline, while distillates stockpiles were expected to be unchanged.

June West Texas Intermediate crude CLM8, rose 14 cents, to settle at $68.19 a barrel on the New York Mercantile Exchange.

US CRUDE OIL PRICE CHART, DAILY TIMEFRAME – 3 Months

NAT GAS NEWS

The U.S. Energy Information Administration reported Thursday that domestic supplies of natural gas fell by 18 billion cubic feet for the week ended April 20. Analysts surveyed by S&P Global Platts had forecast a decrease of 12 billion cubic feet but on average over the last five years for the same week, inventories climbed by 60 billion cubic feet. Total stocks now stand at 1.281 trillion cubic feet, down 897 billion cubic feet from a year ago, and 527 billion below the five-year average, the government said.

June natural gas NGM18, closed Thursday at $2.839 per million British thermal units.

52WK RANGE
$2.550 – $3.020

OklahomaMinerals.com announces a new evaluation tool for mineral owners, called SimplePetro. This tool enables mineral owners to obtain a report on their producing mineral interest at no cost, using a web-based petroleum economics and cash flow evaluation program that allows users to calculate a range of values in just 10 clicks. Click here to try it: http://bit.ly/2po77Fj

Oklahoma City-based Devon Energy completes layoffs

Devon Energy Corp. executives said Thursday they have completed most of the company’s previously announced layoffs of about 300 employees, or 9 percent of the company’s workforce.

The cuts include about 240 employees in Oklahoma City, with the remainder in Canada and at Devon’s U.S. field offices.

Closing Thought: .Your character is the sum total of your habits ~Rick Warren

Have a great weekend from Oklahoma Minerals!

Talk soon,
Gib Knight

Friday Snippets

In Turnabout, Judge Erases Challenge To NM Drilling Permits

A New Mexico federal judge on Monday rejected all challenges by environmental groups and a Navajo tribal group seeking to block the Bureau of Land Management from allowing further drilling in New Mexico’s Mancos Shale, after originally saying the groups’ National Historic Preservation Act allegations had merit.

Kinder Morgan considers building 2nd Permian gas pipeline

Kinder Morgan is holding preliminary discussions with shippers for a second natural gas pipeline in the Permian Basin, which, together with its Gulf Coast Express pipeline set to enter service in October 2019, should help relieve the region’s gas transportation bottlenecks. Kinder Morgan is also considering expanding its existing infrastructure, such as the El Paso Natural Gas Pipeline.

EPA reportedly preparing policy designed to help oil, gas industry

The Environmental Protection Agency is reportedly working on a new policy that could help prevent costly legal battles by encouraging the oil and natural gas industry to self-audit and report their potential emissions violations. Under the policy, oil and gas companies that choose to self-audit would enjoy more flexibility such as extended time to fix problems and would be given more audit alternatives.

Texas energy economy flourishing as drilling boom gains momentum

As the Permian Basin continues to hum with activity, payrolls in Texas’ energy sector climbed by 42% in February after a 17% increase in January, bringing the unemployment rate in the heart of the Permian down to 2.5%, according to the Federal Reserve Bank of Dallas. “The Permian Basin economy remains robust in terms of employment, energy and housing,” the Dallas Fed said, noting, however, that it is difficult for companies to find workers.

Private equity firms step up investments in Houston’s oil industry

Private equity firms have recently accelerated investments in Houston’s energy sector through oil asset acquisitions and new office openings in moves that illustrate the growing role private equity is playing in the US oil patch. This week, private equity player Ares Management teamed up with ARM Energy Holdings to develop Houston-based Salt Creek Midstream, Castle Harlan launched Titan Production Equipment after acquiring Exterran’s production equipment manufacturing assets in North America, and New York-based Orion Energy Partners announced the opening of a Houston office.

North American explorers seen posting limited production gains in Q1

Analysts expect North American explorers to report modest increases in oil and natural gas production in the first quarter of the year, with the exception of a handful of gas operators, including Gulfport Energy, which boosted gas production during the quarter by 35%. “We do not think companies will pivot to more aggressive programs at this time as E&Ps could be hit by the potential risk of incremental service cost inflation if oil prices hold these levels,” said The Williams Capital Group analyst Gabriele Sorbara.

Cheaper US crude to give boost to small-refiner earnings

The recent decline in the price of Midland, Texas, crude to three-year lows is expected to give a financial boost to small, independent US refiners such as Delek US Holdings and HollyFrontier, whose facilities are equipped to process light, sweet crude from West Texas. “To have your major feedstock be in such abundant supply is unequivocally a positive for US refining,” said Tudor, Pickering, Holt & Co. analyst Matthew Blair.

Pipeline firms may need to refund billions in wake of new tax law

The Trump administration’s tax overhaul may force pipeline companies such as Williams Cos. and Enbridge to refund as much as $18.5 billion of the money they charged to drillers, utilities and United Airlines before the new tax rules took effect. The Federal Energy Regulatory Commission will only issue a decision on potential refunds and timing after reviewing comments from the industry.

ConocoPhillips Wins $2B In Claim Against Venezuela Oil Co.

ConocoPhillips prevailed Wednesday in an arbitration against Venezuela’s state-owned oil company over the 2007 nationalization of two of its onshore extra-heavy oil projects, receiving a $2.04 billion award from an International Chamber of Commerce tribunal, the oil company said.

Shale helps fuel record Pa. gas production in 2017

Pennsylvania’s marketed natural gas production rose 3% from 2016 to a record 15 billion cubic feet per day in 2017, with output from shale plays in the Appalachian Basin driving the growth, according to the Energy Information Administration. Natural gas drilling permits climbed from 1,352 in 2016 to 2,038 last year, while the rig count averaged 33 units in 2017, up from 20 in 2016, according to the Pennsylvania Department of Environmental Protection.

EQT Midstream Boosts Biz With Asset Buy, $2.4B Merger

Pittsburgh-based EQT Midstream Partners LP said Thursday it will consolidate operations through deals that include the acquisition of two Ohio natural gas gathering systems for $1.69 billion and a merger with Rice Midstream Partners LP with a transaction value of $2.4 billion.

April 20, 2018

With the top acreage gobbled up, few companies are staking new claims. Instead, the industry is entering a new phase of consolidation that will likely drive small and mid-sized firms from the West Texas shale play as energy companies buy up competitors to expand holdings in the world’s hottest oil-producing region, analysts said.

Since the bottom of the last oil bust in early 2016, wildcatters, private equity investors, independents and oil majors have flocked to the West Texas shale play, driving up land prices to as high as $60,000 an acre and leaving more production companies with land holdings there than drilling rigs. That has set the stage for a wave of mergers and acquisitions.

“It’s kill or be killed,” said Ethan Bellamy, an energy analyst at Robert W. Baird & Co. “The Permian Basin is the Beverly Hills of oil, so it’s no surprise that M&A is heating up foremost in that marquee region.”

Numbers game

The Permian land rush peaked in the first quarter of 2017 with nearly $18 billion in Permian deals – primarily acreage sales. Those deals fell off sharply in the second half of last year to less than $4 billion in final six months of 2017, according to the research firm IHS Markit.

Permian deals rebounded to $10 billion in the first three months of this year, according to IHS Markit, but that was nearly all the result of Concho Resource’s purchase of RSP Permian, signaling the shift from acreage sales to mergers and acquisitions.

In many ways, the shift is driven by numbers. More than 500 exploration and productions companies have holdings in the Permian while there are fewer than 450 rigs operating in the oil field. In other words, there aren’t enough rigs, fracking crews and money to go around, analysts said, making consolidation inevitable.

Oil’s Bullish Signals Show Saudi Arabia’s $80 Goal Within Reach

By Serene Cheong | Bloomberg
April 19, 2018

While $80 oil seemed in the clouds just a year ago, it now looks primed for capture.

Technical indicators show that the price Saudi Arabia is said to be aiming for may be within reach, with global benchmark Brent crude already above $74 a barrel. While futures in London have broken past the 50 percent Fibonacci retracement of the slump from when they were above $100 in mid-2014, another signal shows the rally could persist to the line just under $82.

Recent corrections in Brent have shown prices hit a speed bump only when the reading on its Relative Strength Index climbs to 75, well past the usual overbought signal of 70. With that measure now at about 68, it points to continued support for crude on its way up.

Apart from the technical indicators, investors will also be watching tumbling U.S. petroleum stockpiles, which now stand below their five-year average for the first time since 2014, and record American production. Geopolitical tensions continue to simmer, meanwhile, with U.S. President Donald Trump due to make a decision that could lead to sanctions being reimposed on OPEC member Iran.

A return of financial and economic restrictions on the Persian Gulf state could remove 500,000 barrels per day of the country’s crude from global markets, according to one analyst estimate.

Automation, horizontal drilling help Texas producers pump more than ever

Texas produced an estimated 110.5 million barrels in February, surpassing the 2014 monthly peak of 109.5 million barrels, said the Texas Petro Index. Automation and longer laterals help oil drillers pump record volumes of oil using almost half the rigs and more than 25% fewer workers than they did in 2014, according to the Texas Petro Index calculated by economist Karr Ingham.

“The implications are striking: record crude oil and natural gas production at significantly lower prices, rig counts, and number of industry workers,” Ingham said. “It means that fewer employees are needed to produce more crude oil in Texas and the U.S. than has ever been produced.”

Ingham’s index estimates the upstream oil and gas industry employs about 215,500 people in Texas. That’s higher than 189,400 people a year ago, but well below the nearly 300,000 workers at the end of 2014.

Oklahoma Completion Filings – Data provided by Oseberg.io

Oklahoma Energy Acquisitions filings are related to recent horizontal well completions in the STACK. As they have been increasing their position in Kingfisher County over the past couple of years, look for future completion activity.

Canyon Creek Energy – Arkoma, LLC (“CCEA”) announced Thursday that it has entered into a Joint Development Agreement (“JDA”) with Pivotal Petroleum Partners II, LP (“Pivotal”) to jointly fund the development of wells on CCEA’s acreage in Atoka, Coal, Hughes and Pittsburg Counties, Oklahoma, targeting the stacked pay formations in the expanding Arkoma STACK play.

CCEA and Pivotal plan to drill 18 wells in 2018 targeting the Woodfordshale and Mayes shale in various locations throughout the Arkoma Basin of Southeastern Oklahoma. Pivotal will fund 75% of CCEA’s working interest in all wells covered by the JDA. Once Pivotal achieves a preferred return, the majority of the wellbore working interest and net revenue interest will revert back to CCEA. This new partnership will accelerate CCEA’s drilling activity across the company’s 100,000 gross acre operated leasehold position.

EIA REPORT SUMMARY

The EIA reported a bullish oil storage report Wednesday. Crude storage declined 1.071 million bbls versus analysts surveyed by S&P Global Platts had forecast a climb of 625,000 barrels, while the American Petroleum Institute on Tuesday reported a fall of roughly 1 million barrels.

The lower than expected draw came from a combination of higher than expected crude imports and higher than forecast US oil production.

Not only did US crude storage decline, gasoline, distillate and total liquid stockpile saw sizable declines w-o-w. Gasoline supplied reached a record of 9.86 million bbls, and yet storage declined 2.968 million bbls indicating gasoline demand for the year reached an all-time high. Distillate storage also saw a sizable decline w-o-w coming in lower by 3.107 million bbls versus the 5-year average draw of 481k bbls.

Oil prices on Thursday hit highs not seen since 2014, built on the ongoing drawdowns in global supply and as Saudi Arabia looks to push prices higher, though U.S. crude gave back gains in the afternoon to finish lower.

A global oil glut has been virtually eliminated, according to a joint OPEC and non-OPEC technical panel, two sources familiar with the matter said, thanks in part to an OPEC-led supply cut deal in place since January 2017.

U.S. West Texas Intermediate (WTI) June crude futures CLM18 settled 14 cents lower at $68.33 a barrel after earlier hitting $69.55, their highest since Nov. 28, 2014. WTI has gained nearly 8 percent in the last eight days of trading.

Brent crude futures ended at $73.78 a barrel, up 30 cents. The global benchmark touched $74.75 a barrel, its highest since Nov. 27, 2014 – the day OPEC decided to pump as much as it could to defend market share.

NAT GAS NEWS

The U.S. Energy Information Administration (EIA) reported Thursday morning that U.S. natural gas stocks decreased by 36 billion cubic feet for the week ending April 13.

Analysts were expecting a storage withdrawal of around 23 billion cubic feet. The five-year average for the week is an injection of 38 billion cubic feet, and last year’s storage increase for the week totaled 54 billion cubic feet. Natural gas inventories fell by 19 billion cubic feet in the week ending April 6.

The forecast for overall natural gas demand next week moves up into the “high” range as cooler, stormier weather moves across the Midwest into the Northeast on Friday. Milder, cooler weather is expected across much of the country next week, pushing demand for natural gas above average levels for this time of year.

May natural gas NGK18, closed Thursday at $2.660 per million British thermal units.

52WK RANGE
$2.504 – $3.000

OklahomaMinerals.com announces a new evaluation tool for mineral owners, called SimplePetro. This tool enables mineral owners to obtain a report on their producing mineral interest at no cost, using a web-based petroleum economics and cash flow evaluation program that allows users to calculate a range of values in just 10 clicks. Click here to try it: http://bit.ly/2po77Fj

Closing Thought: Storms make trees take deeper roots – Dolly Parton

Have a great weekend from Oklahoma Minerals!

Talk soon,
Gib Knight

Friday Snippets

Morgan Stanley Fund Adds Delaware Basin Assets For $1.75B

Texas-based natural gas and crude oil midstream company Brazos Midstream Holdings LLC has agreed to sell its Delaware Basin subsidiaries to an investment fund managed by Morgan Stanley Infrastructure Inc. for $1.75 billion, the company said Monday.

Willbros Investors Notch $10M Deal In Stock Drop Fight

A proposed class of Willbros Group Inc. shareholders asked a Texas federal judge on Friday to approve a $10 million settlement ending allegations that the oil and gas infrastructure company lacked sufficient oversight and failed to account for significant losses it suffered on two pipeline projects that caused its stock to founder, saying the deal is a fair resolution after four years of litigation.

North American upstream M&A activity seen accelerating

Exploration and production companies in North America are expected to step up dealmaking activity in the second half of the year, with the bulk of deals likely targeting onshore plays beyond the Permian Basin, according to energy consulting firm 1Derrick. Mangesh Hirve, chief operating officer at 1Derrick, forecast a surge in transactions involving assets in Texas’ Eagle Ford Shale and Oklahoma’s SCOOP formation and expects many of the deals to be in the $100 million to $500 million range.

Wells verify discovery’s potential in Alaska’s North Slope, firm says

ConocoPhillips says six wells it drilled at its Willow discovery in the western North Slope of Alaska hit oil and verified the play’s potential. The Houston-based company drilled three appraisal and three exploration wells at the site, which contains at least 300 million barrels of oil.

N.M.’s small producers have trouble keeping up with shale boom

Small, independent producers in New Mexico that can’t afford to spend money on modern drilling technology may soon fall victim to the shale boom as they find it increasingly difficult to run aging oil wells with outdated techniques. “The low-volume wells run by stripper operators like me supplied about 20% of the market until recently, but it’s fading away now,” said Gregg Fulfer of Fulfer Oil & Cattle.

Machine learning can help better maintain the nation’s pipelines

Pipelines criss-cross the country, often in and near population centers, yet few breaches are revealed by advanced detection techniques, writes Tim Edward with Rob Salkowitz. Machine learning can help industry experts comb through huge amounts of data to analyze results and then detect and mitigate pipeline problems before they occur.

How Tellurian’s CEO plans to upend the LNG export market

Tellurian President and CEO Meg Gentle is on a quest to transform the global liquefied natural gas market with an innovative business model that involves seeking investors to fund Tellurian’s projects up front in exchange for cheap gas in the future. Some analysts and stock investors have questioned the feasibility of Tellurian’s model, which so far has received backing from General Electric, Total and Saudi Aramco, with additional partnerships expected to be completed this year.

Enterprise completes expansion of Midland-to-Sealy Permian pipeline

Enterprise Products Partners has boosted the capacity of its 416-mile Permian Basin pipeline running from Midland, Texas, to Sealy, Texas, by 35,000 barrels per day to 575,000 barrels per day. Enterprise also expects to complete a 143-mile pipeline with capacity of more than 300,000 barrels per day in the Permian’s Delaware Basin in July.

N.D. regulators mull changing natural-gas flaring policy

The North Dakota Industrial Commission is scheduled to examine today a series of recommendations made by a North Dakota Petroleum Council task force to curb flaring and accelerate infrastructure development. The task force said the state should raise the gas capture target to 88% in November as planned, and recommended other flaring policy tweaks including semiannual reviews of firms’ gas capture results and extended credits for companies that beat targets, which would help the industry achieve the 88% goal.

Analysts expect lackluster Q1 results from oilfield services firms

Oilfield services firms will likely report disappointing first-quarter results as severe winter conditions, limited opportunity to increase prices and overcapacity in hydraulic fracturing fleets take a toll on earnings despite Wall Street’s expectations for a comeback. “There were substantial improvements in the second half of last year, but we took a surprising pause in the fourth and first quarters due to winter impacts,” Bernstein analyst Colin Davies said.

Private equity firms step up investments in Houston’s oil industry

Private equity firms have recently accelerated investments in Houston’s energy sector through oil asset acquisitions and new office openings in moves that illustrate the growing role private equity is playing in the US oil patch. This week, private equity player Ares Management teamed up with ARM Energy Holdings to develop Houston-based Salt Creek Midstream, Castle Harlan launched Titan Production Equipment after acquiring Exterran’s production equipment manufacturing assets in North America, and New York-based Orion Energy Partners announced the opening of a Houston office.

Report forecasts strong growth momentum for US LNG exports

US liquefied natural gas export terminals could see natural gas supply climb to 14.7 billion cubic feet per day within 10 years, helping increase exports to nearly 23 billion cubic feet per day after 2040 under the most conservative estimates, according to a report by consultancy ICF. The US exports 4 billion cubic feet of LNG per day, but that volume could more than double to almost 10 billion cubic feet per day next year.

April 13, 2018

U.S. Oil Debt Eases, Meaning Drillers Target Next Shale Play

Bloomberg Markets | By Kevin Crowley

U.S. oil and gas producers expect their borrowing ability to increase over the next few months, leaving them open to invest in new shale assets, particularly the Eagle Ford in Texas.

That’s the conclusion of Haynes & Boone LLP, which found that more than 80 percent of respondents predict their borrowing bases, or credit availability backed by collateral, will likely increase as banks conduct their biannual reviews. That may benefit the Eagle Ford and Austin Chalk as the “next big play,” the study said.

The Eagle Ford is already an established shale play, generating about 12 percent of U.S. oil, but it’s been receiving more attention of late. While the formation produces only about a third as much crude as the Permian Basin, the country’s most prolific field, the Eagle Ford is closer to the Gulf Coast’s network of refineries and pipelines, and drilling rights are cheaper.

In March, Steve Chazen, former Occidental Petroleum Corp. chief executive officer, bought drilling rights in the Eagle Ford and Austin Chalk from EnerVest Ltd. in a deal worth $2.66 billion. KKR & Co. and Venado Oil & Gas LLC also expanded their position in the play with a $765 million purchase of Cabot Oil & Gas Corp. assets that month.

EOG Resources Inc. is the biggest producer of crude from the Eagle Ford currently. Production from the play, though, remains below its 2015 peak, according to the Energy Information Administration, potentially creating an opportunity for new entrants.

With West Texas Intermediate, the U.S. crude benchmark, up 28 percent in the past six months, pressures have been easing on debt-loaded oil producers. They’ve used that to lock in prices. About 50 to 60 percent of their 2018 production has been hedged, the survey indicated.

Producers will use cash flow from operations, bank debt and private equity as their main sources of capital this year, the survey said. Bankruptcies “are showing a dropoff,” it said.

U.S. saw record natural gas production in 2017

US natural gas gross withdrawals climbed to an all-time high of 90.9 billion cubic feet per day in 2017, while marketed natural gas production also hit a record of 78.9 billion cubic feet per day, according to the Energy Department. Louisiana and the Appalachian region saw the biggest gains in gross withdrawals, but Texas remained the No. 1 US gas producer even though output in the state fell from 22.2 billion cubic feet per day in 2016 to 21.7 billion cubic feet per day last year.

Nationally, gross withdrawals increased for five consecutive months starting in July and reached a record monthly high of 96.7 billion cubic feet per day in December, the Energy Department reported. Marketed natural gas production set an annual record at 78.9 billion cubic feet per day.

Natural gas exports increased 36 percent amid the surge in production, making the nation a net natural gas exporter for the first time in nearly 60 years.

Automation, horizontal drilling help Texas producers pump more than ever

Texas produced an estimated 110.5 million barrels in February, surpassing the 2014 monthly peak of 109.5 million barrels, said the Texas Petro Index. Automation and longer laterals help oil drillers pump record volumes of oil using almost half the rigs and more than 25% fewer workers than they did in 2014, according to the Texas Petro Index calculated by economist Karr Ingham.

“The implications are striking: record crude oil and natural gas production at significantly lower prices, rig counts, and number of industry workers,” Ingham said. “It means that fewer employees are needed to produce more crude oil in Texas and the U.S. than has ever been produced.”

Ingham’s index estimates the upstream oil and gas industry employs about 215,500 people in Texas. That’s higher than 189,400 people a year ago, but well below the nearly 300,000 workers at the end of 2014.

US export boom making Okla. oil hub less important

Even as US oil production flirts with record levels, crude oil inventories in Cushing, Okla., have plunged to 28.2 million barrels in early March, the lowest level in more than three years, in a sign that the hub is becoming less relevant as US oil exports grow. Cushing is the delivery point for the benchmark West Texas Intermediate crude, but that could change as traders and crude buyers push for the replacement of WTI with a new benchmark based on physical oil flows in Houston.

The price of oil in Cushing – which bills itself as “the pipeline crossroads of the world” – is used to value crude grades produced around the United States and some oil imported from Canada, Mexico, and South America. Prices at the hub also provide the basis for an average of 1.3 million WTI futures contracts CL-TOT – worth about $82 billion at current prices – that change hands on the CME Group’s New York Mercantile Exchange every day, making it one of the world’s most actively traded commodities.

Cushing got its distinction in the early 1920s when tanks sprung up to store oil en route from Oklahoma and Texas to major metropolitan areas and refineries in the Midwest.

But as more pipelines are built to take oil from U.S. shale fields to Gulf refineries or for export markets, much of the crude produced in the giant Permian Basin oilfield in Texas and elsewhere no longer passes through Cushing.

Instead, producers are increasingly shipping directly to seaports such as Houston, where vessels carry the oil to dozens of countries worldwide. That reflects a major transformation in global crude flows since the United States lifted a four-decade ban on oil exports in late 2015. Some traders and buyers argue the benchmark needs to change to reflect this.
Joshua Wade, a crude oil marketer in Oklahoma, sees the benchmark delivery point moving south before long.

“That’s the direction it’s moving,” he said. “As opposed to importing, now you’re exporting through the same infrastructure … The oil capital of the nation is in Houston.”

U.S. oil and gas producers expect their borrowing ability to increase over the next few months, leaving them open to invest in new shale assets, particularly the Eagle Ford in Texas.

That’s the conclusion of Haynes & Boone LLP, which found that more than 80 percent of respondents predict their borrowing bases, or credit availability backed by collateral, will likely increase as banks conduct their biannual reviews. That may benefit the Eagle Ford and Austin Chalk as the “next big play,” the study said.

The Eagle Ford is already an established shale play, generating about 12 percent of U.S. oil, but it’s been receiving more attention of late. While the formation produces only about a third as much crude as the Permian Basin, the country’s most prolific field, the Eagle Ford is closer to the Gulf Coast’s network of refineries and pipelines, and drilling rights are cheaper.

Producers will use cash flow from operations, bank debt and private equity as their main sources of capital this year, the survey said. Bankruptcies “are showing a dropoff,” it said.

EIA REPORT SUMMARY

EIA reports larger-than-expected build in US crude inventories

The U.S. Energy Information Administration reported crude supplies climbed by 3.3 million barrels for the week ended April 6. Analysts surveyed by S&P Global Platts had forecast a climb of 100,000 barrels, while the American Petroleum Institute on Tuesday reported a rise of roughly 1.8 million barrels.

Net U.S. crude imports rose last week by 1.7 million barrels per day to 8.65 million bpd. However, the overall four-week average of U.S. imports has remained relatively stable from the same period a year ago.

Weekly production topped 10.5 million bpd for the first time, the EIA said, though the weekly figures are notoriously volatile; EIA monthly figures for December and January put production sharply lower than the weekly estimates.

Crude stocks at the Cushing, Oklahoma, delivery hub rose by 1.1 million barrels.

Oil prices settled on a mixed note Thursday, with the global crude benchmark ending slightly lower, but the U.S. benchmark shifting higher late in trading session to hold ground at a more than three-year high.

May West Texas Intermediate crude CLK8, rose 25 cents to settle at $67.07 a barrel on the New York Mercantile Exchange. It marked its highest settlement since Dec. 3, 2014, for the second session in a row.

June Brent crude LCOM8, the global benchmark, declined by 4 cents to $72.02 a barrel on ICE Futures Europe. It pared much of its earlier losses, after ending at a more than three-year high of $72.06 Wednesday.

NAT GAS NEWS

Natural-gas futures finished higher after the EIA on Thursday said U.S. supplies of commodity fell by 19 billion cubic feet for the week ended April 6. The market was generally expecting a decline in the range of 8 billion to 15 billion cubic feet.

Seasonal averages call for a slight build in supplies at this time of year, but a late round of cooler temperatures pulled demand above normal of late.

May natural gas NGK18, closed Thursday at $2.686 per million British thermal units.

52WK RANGE
$2.504 – $3.000

OklahomaMinerals.com announces a new evaluation tool for mineral owners, called SimplePetro. This tool enables mineral owners to obtain a report on their producing mineral interest at no cost, using a web-based petroleum economics and cash flow evaluation program that allows users to calculate a range of values in just 10 clicks. Click here to try it: http://bit.ly/2po77Fj

This was developed by two reservoir engineers who teamed up to provide a free, powerful, web-based, and transparent product that we believe will change the way you think about oil and gas valuations.

“Our goal is to help all the folks out there who can’t justify the expense of a big economics software package like Aries or PHDWin. Although every well has just one operator, it may have hundreds of owners; we think that everyone involved in the project deserves an estimate of what their property’s worth.” – Eric Miller, Co-Founder & Petroleum Engineer.

Closing Thought: The world as we have created it is a process of our thinking. It cannot be changed without changing our thinking. ~Albert Einstein

Have a great weekend from Oklahoma Minerals!

Talk soon,
Gib Knight

Friday Snippets

Morgan Stanley Fund Adds Delaware Basin Assets For $1.75B

Texas-based natural gas and crude oil midstream company Brazos Midstream Holdings LLC has agreed to sell its Delaware Basin subsidiaries to an investment fund managed by Morgan Stanley Infrastructure Inc. for $1.75 billion, the company said Monday.

Kinder Morgan considers abandoning Trans Mountain pipeline expansion

Kinder Morgan has suspended “nonessential” spending on the Trans Mountain pipeline expansion in Canada and threatened to cancel the project altogether unless provincial officials in British Columbia and Alberta, along with the Canadian government, reach a consensus on the project by May 31. “We have determined that in the current environment, we will not put KML shareholders at risk on the remaining project spend,” said Kinder Morgan President and CEO Steve Kean.

Spending on major oil, gas projects down, consultancy says

Average spending on major oil and natural gas projects fell to about $2.7 billion last year, about half of the average spent over the last decade, energy consultancy Wood Mackenzie says. Companies seeking quick returns on upstream investments are spending more on existing projects and less on new developments.

Austin Chalk formation moves into the spotlight

The Austin Chalk formation, a legacy conventional play in Texas and Louisiana, is seeing growing interest from drillers, with several recent deals targeting acreage in the region, particularly the Giddings field in Texas. Larger completions jobs and higher oil prices have lowered the cost of drilling in the region, but adding to the trend’s allure are the extremely high flow rates that can be achieved by applying super fracks to the parts of the formation that have no natural fractures.

Technical analyst concerned as US oil output soars

Technical analyst Walter Zimmerman has expressed concern about a surge in US oil production, which has reached a record high of 10.46 million barrels last week. “That basically means that if we don’t export enough, prices are going to absolutely collapse,” he says.

The widening price differential between the Brent and West Texas Intermediate crude benchmarks along with weaker oil demand from US Gulf Coast refineries during spring maintenance season are helping drive US crude exports to Europe, which threaten to displace some light sweet, Mediterranean barrels. “There is pretty much everything offered — WTI, Eagle Ford, Mars, also Canadian [heavy crudes] … there is a decent volume available,” a crude trader said.

Cove Point LNG enters long-term commercial service

Dominion Energy’s Cove Point liquefied natural gas export facility near Lusby, Md., has begun long-term commercial operations, with its liquefaction train operating near peak capacity. The facility should export at least 4.6 million metric tons of LNG per year to its two customers, Indian gas utility Gail and a Japanese joint venture between Sumitomo and Tokyo Gas.

SandRidge willing to consider takeover offers, change its strategies

Embattled US shale producer SandRidge Energy said Monday it would examine any “credible” buyout offers, including one from activist investor Carl Icahn, who said last week he could make an all-cash bid for the company. SandRidge is also exploring alternatives to its business strategies amid pressure from Icahn, who’s pushing for a complete overhaul of SandRidge’s management.

Statoil, Total Pay $340M For Gulf Of Mexico Oil Assets

Statoil ASA and Total SA on Wednesday announced that they had completed their acquisition of Cobalt International Energy Inc.’s interest in certain Gulf of Mexico oil assets for an aggregate purchase price of nearly $340 million.

Tallgrass Energy Investors Say Merger Plan Lacks Key Info

A pipeline operator and its board of directors have violated the Exchange Act by omitting certain financial information from documents filed with the U.S. Securities and Exchange Commission relating to a merger agreement, says a proposed class action filed Thursday in Delaware federal court.

Qatar, ExxonMobil weigh US shale partnership

ExxonMobil and Qatar are considering an agreement in which Qatar would invest in US natural gas wells with an Exxon subsidiary, sources say. The partnership in US shale projects would deepen Exxon’s relationship with the Middle Eastern country, which works with the oil giant on other projects.

April 6, 2018

USOP sets drill schedule for Nevada.

USOP wants to follow up the Eblana 1 well which unearthed an oil accumulation the Hot Creek Valley area of Nevada.

US Oil & Gas Plc (LON:USOP) has contracted a rig for a planned drill schedule in Nevada.
The company, in a statement released after market close on March 29, the explorer said it had signed up Capstar Drilling for up to two wells (Eblana-3 and Eblana-6).

It is believed the rig will soon be sent to the Hot Creek Valley project area by April 6 and the company intends to announce details of the drill schedle in due course.

“We are pleased to have secured a state-of-the-art drilling rig for our upcoming campaign in Nevada,” said Brian McDonnell, USOP chief executive.

“On behalf of the board, I would like to express our sincere appreciation of shareholders’ support for the rigorously systematic approach the company has taken to the exploration process in a pioneer region of complex geology.

“We believe our extensive and thorough programme of data collection has reduced risk as far as possible as we explore what we hope will prove a major oil field in Hot Creek Valley.”

Carl Icahn Will Nominate Full Sandridge Board Slate

Bloomberg Markets is reporting that Carl Icahn plans to nominate a full slate to the board of Sandridge Energy Inc. that would commit to seeking strategic alternatives for the embattled oil and gas driller.

The billionaire investor, who said he has “grave concerns” about the current board’s ability to run a review of its own, added he would be willing to put in an all-cash offer for the company that would allow shareholders the decision to monetize their investment or continue on as an investor, according to a regulatory filing Wednesday.

The investor said he believes that if the new strategic review were run by the current board, it is “likely to be value destructive” because of its “history of making poor decisions on behalf of stockholders.”

Sandridge said last month it was entertaining offers from would-be suitors after rejecting an unsolicited $589 million takeover bid from Midstates Petroleum Co.

Icahn disclosed a stake in Sandridge in December and successfully fought against its proposed takeover of Bonanza Creek Energy Inc. He said at the time that he planned to nominate one director to the board at its annual general meeting.

Credit: Bloomberg Markets | April 4, 2018

ConocoPhillips to sell noncore assets in Permian, Eagle Ford

ConocoPhillips said it expects proceeds of $250 million from a series of separate sales of some noncore assets in the Permian Basin and Eagle Ford, most of which were conducted in the first quarter. Conoco also unveiled that it has acquired 35,000 net acres in Canada’s Montney Shale for $125 million and amassed a position in Louisiana’s Austin Chalk, investments the company believes have “the potential to add to our low cost of supply resource base without requiring significant near-term capital commitments.”

“We’ve got a really neat group of geologists who think they see something in Ohio,” said George Stark, a Cabot spokesman based in Pittsburgh. “They see something, and we want to go touch it.”

Cabot is looking for natural gas and oil a hundred miles northwest of the Utica Shale play’s core in eastern Ohio.

The Houston-based company has filed paperwork with the Ohio Department of Natural Resources for two well pads in Ashland County, and plans to drill up to five test wells in an area that includes parts of Richland, Knox, Wayne and Holmes counties.

During the early days of Utica exploration, Devon Energy drilled a few wells in the area Cabot is targeting, but moved on.

Cabot is planning to explore below the Utica Shale, Stark said.

Paperwork filed with ODNR indicates the company is targeting the Rome and Knox formations, but Stark declined to be specific. The agency has yet to issue the company a drilling permit.

For the past 10 years, Cabot has been drilling Marcellus Shale horizontal wells in Pennsylvania’s Susquehanna County.

Cabot was producing natural gas from 561 horizontal wells at the end of 2017, and has another 3,000 undrilled Marcellus locations among its 172,000 acres in northeast Pennsylvania, according to the company’s latest investor presentation.

The company plans to drill approximately 85 wells in the Marcellus Shale this year.

Stark said Cabot has spent almost $5 billion in Susquehanna on wages, supply purchases, equipment rentals, well drilling and pipeline construction. Landowners in Susquehanna and a neighboring county have earned more than $1.5 billion in royalties and signing bonuses, according to the company.

Credit: Shane Hoover / GateHouse Me­dia Ohio

Cyber attack shuts down Energy Transfer pipeline system

The Texas pipeline company Energy Transfer Partners notified all oil and gas shippers on Monday that their data system for its pipeline network had been hacked and the culprit was still unknown.

The attack Energy Transfer described in a shipping notice on Monday didnt afffect its pipeline systems, the company told Bloomberg. The attack was limited to the electronic data interchange system that facilitates transactions over oil and gas moving through its pipelines and was directed at the contractor that manages the system, Latitude Technology, according to the company.

The attack reported by Energy Transfer doesn’t bear the mark of a foreign nation-state trying to hack into the critical operating systems of U.S. pipelines, said Patrick McBride, chief marketing officer of cybersecurity firm Claroty in Virginia. Instead, it appears aimed at gaining data — such as who is buying what from whom at which price — that can be used to make trades in financial markets or sold directly, McBride said.

From 2011 to 2015 350 cyber security incidents against U.S. energy companies were reported to the Department of Homeland Security. But the federal agency has not identified any of the victims of the online attacks.

Remember When – 2015 – Oil & Gas: An industry in flux

U.S. oil inventory levels became a closely watched metric in 2015, as it provided tangible evidence that the world was awash in oil. Oil storage topped off at an 80-year high in April at 490 million barrels. Stocks were drawn down throughout the summer, but began rising again in the fall, once again hitting 490 million barrels in December.

Rising Debt. The oil and gas industry had depended on debt to underwrite the shale drilling boom 2009-2014, but debt started to pile up in 2015 as oil prices crashed. Oil majors raised a record level of debt – $31 billion – in the first two months of the year. While they could handle the burden, smaller companies were struggling under the weight of their rising debt loads. The junk bond market was dragged down in 2015 because of distressed oil and gas companies.

To deal with mounting debt, the industry cut to the bone. Spending on exploration and production fell by $250 billion in 2015 compared to 2014. That helped companies deal with all of the red ink in the near-term, but it meant dramatically lower supply growth in the years ahead.

EIA & API REPORT SUMMARY

The Energy Information Administration reported a 4.6-million draw in crude oil inventories for the week to March 30, largely in line with analysts polled by IG, who had expected a draw of 4.1 million barrels. For the previous week, the EIA had reported a 1.6-million-barrel build in crude oil inventories.

A day earlier, the American Petroleum Institute surprised traders with a crude oil inventory draw of 3.28 million barrels, versus analyst expectations of a modest build.

Refineries last week processed 16.9 million barrels of crude daily and produced 10.1 million barrels of gasoline and 5 million barrels of distillate daily.

Gasoline inventories fell in the reporting period by 1.1 million barrels, after a weekly draw of 3.5 million barrels in the prior week, and distillate stockpiles moved higher by 500,000 barrels.

Oil prices regained some lost ground Thursday as fears of a U.S.-China trade war appeared to ease somewhat.

Brent crude LCOM8, the global benchmark, ended 31 cents higher at $68.33 a barrel on London’s Intercontinental Exchange. On the New York Mercantile Exchange, West Texas Intermediate futures CLK8, rose 17 cents to end at $63.54 a barrel.

Prices had fallen to two-week lows Wednesday amid escalating trade tensions between the U.S. and China, but crude markets pared losses following a bullish report from the U.S. Energy Information Administration.

NAT GAS NEWS

A mild weather outlook, an expectation for falling demand and continued strong production have put downward pressure on prices.

The colder and warmer-than-average temperatures seen across the country of late are not expected to stick around moving forward, as the most recent eight- to 14-day weather outlook from the National Weather Service calls for a likelihood of only slightly colder-than-average temperatures in the Southwest, Northwest and Rockies, while slightly warmer-than-average temperatures are expected in the Northeast, Southeast, Midwest, Midcon and Texas.

Coming off the back of a mild weather outlook is an expectation of a sizable drop in demand across the country, as US demand is estimated to average 67.6 Bcf/d over the next eight- to 14-day period, down 10.9 Bcf/d from the 78.5 Bcf/d averaged so far over April, according to S&P Global Platts Analytics.

The US Energy Information Administration announced Thursday an estimated 20-Bcf draw from storage for the week ended March 30. However, there was a non-flow-related adjustment that brought the net change to the national stocks to an estimated 29-Bcf withdrawal.

The withdrawal reported Thursday brings national stock levels to 1.354 Tcf and brings the deficit against the five-year average to an estimated 20.4%, according to EIA data.

May natural gas NGK18, closed Thursday at $2.675 per million British thermal units.

BCE-Mach, a new oil and natural gas company led by Chesapeake Energy co-founder Tom Ward, has purchased about 155,000 acres with production of about 11,000 barrels of oil per day and 143 million cubic feet of natural gas per day in Oklahoma’s Mississippi Lime formation from Chesapeake. “The Mississippi Lime in Woods and Alfalfa counties is a well-delineated play with an extensive inventory of future drilling locations,” Ward said.

Closing Thought: Discipline is the bridge between goals and accomplishment. ~Jim Rohn

Have a great weekend from Oklahoma Minerals!

Talk soon,
Gib Knight

Friday Snippets

US gas bonanza helps Canada reduce overseas LNG imports

The unprecedented surge in US natural gas production, along with improved pipeline access, has helped Canada scale back overseas imports of liquefied natural gas from suppliers such as Egypt, Norway and Qatar. The Canaport facility in New Brunswick, Canada, took in only 39 million cubic feet of LNG per day in 2017, down from an average of 324 million cubic feet at its 2011 peak, while the volume of US gas piped to Canada increased by 18% last year.

Eagle Ford overtakes Permian in gas production

Preliminary data published by the Texas Railroad Commission showed that the Permian Basin led in terms of oil output in January, producing 32.2 million barrels, with preliminary output for the whole state jumping to 80.6 million barrels of crude. The Eagle Ford Shale was No. 1 in terms of natural gas production, accounting for 46% of total output from the top producing counties, with the state’s average gas production in January at 18.5 billion cubic feet per day.

Tight labor market in Texas puts oil industry recovery at risk

As drilling continues to expand in West Texas’ Permian Basin, the unemployment rate in the region has fallen to its lowest level in years at around 2.9%, well below the Texas average of 4% and national average of 4.1%. Oil and natural gas companies are having a difficult time hiring new employees, forcing firms to look beyond Texas for workers, even though it means higher expenses and lower profit margins.

Increased infrastructure construction expected at N.D. oilfields

Low oil prices have contributed to reduced infrastructure work at North Dakota oilfields in recent years, but investment is starting to pick up in the region. The North Dakota Pipeline Authority says at least 2,000 pipeline miles were added each year from 2011 to 2015, but the number declined to 914 miles of new pipeline in 2016, the last year for which figures are available.

IEA expects short-term capacity crunches in US oil patches

Surging production and the Trump administration’s steel tariffs put the US oil patch, particularly shale basins in the southern US, at greater risk of short-term infrastructure bottlenecks and capacity constraints, according to the International Energy Agency. “Ultimately, Permian and Eagle Ford takeaway capacity is likely to become insufficient by mid-year, with a deficit possibly reaching as much as 290,000 barrels a day during the first half of 2019,” IEA oil analyst Olivier Lejeune said.

Pemex, Lewis Energy partner to develop Mexico shale gas deposit

Pemex has sealed a contract with US company Lewis Energy for the exploration and production of a shale gas deposit in the Olmos field in the Mexican state of Coahuila. About $617 million will be invested in the field under the contract, with Pemex targeting natural gas production of approximately 117 million cubic feet per day by 2021.

An analysis of last month’s Gulf of Mexico offshore lease sale reveals that big producers favored acreage in areas with access to existing infrastructure, a trend that threatens to derail the Trump administration’s plans to unleash offshore oil production by opening all US coasts to drilling. “Spending a lot of money to prospect is probably not going to be looked upon with favor by investors,” said Barclays Head of Energy Markets Research Michael Cohen.

Ohio issues more permits to drill in Utica Shale

The Ohio Department of Natural Resources granted 43 permits to drill wells in the Utica Shale in March, up from 16 in February but down from 58 in March 2017. The number of permits awarded in February was the lowest monthly level in almost two years and was 41% lower than January’s figure.

Capital discipline wins ConocoPhillips some investor love

ConocoPhillips’ focus on shareholder returns and financial discipline is paying off in a big way, pushing the oil giant’s shares up 29% in the past year in a sign that investors increasingly want such companies to prioritize value over growth. ConocoPhillips was one of the first oil companies to make this transition, which also helped it achieve a “sustaining” price of as low as $40 per barrel, giving it an edge over rivals.

Permian shale boom puts pressure on West Texas’ electric grid

Surging drilling activity in the Permian Basin has pushed electricity demand in West Texas to record highs, creating challenges for grid reliability and causing a slowdown in the development of new energy projects such as sand mines due to inadequate transmission. Oncor, a utility serving the Permian Basin, is seeking approval to speed up two transmission projects that would cost about $223.6 million and should help oil and natural gas companies slash costs and boost production.

Anadarko to plug wells near Longmont, Colo.

Anadarko Petroleum plans to start plugging and abandoning seven wells near Longmont, Colo., this week, a process that could last seven to 14 weeks. “The wells have successfully produced the recoverable oil and natural gas at this location and therefore reached the end of their productive life,” Anadarko spokeswoman Jennifer Brice said.

March 30, 2018

Concho Resources to buy RSP Permian in $9.5 billion West Texas merger

Midland-based Concho Resources said it will pay $9.5 billion to buy West Texas rival RSP Permian in a merger that creates the largest shale driller in the booming Permian.

While not a household name, the big sale makes Concho an even larger power player in the Permian Basin, which now accounts for more than half of all the oil drilling rigs in the entire country. RSP Permian is based out of Dallas, but it’s also focused just on West Texas and the parts of the Permian extending into New Mexico.

Perfectly positioned to capitalize off the Permian shale boom from its Midland home, Concho has grown rapidly as one of the leaders in domestic oil production. Concho was valued on Wall Street at more than $23 billion before the deal was announced Wednesday.

RSP, which was formed in 2010. The deal values RSP at just over $51 per share, a 29 percent premium to Tuesday’s closing price and higher than it has ever traded.

Sanford C. Bernstein estimates the price implies about $75,000 per acre for RSP’s land once you back out the value of production. That’s well above the already elevated levels of $30,000-$50,000 per acre typically paid in recent Permian asset deals.

That Concho is paying such a price reflects, in part, the value of its currency. Prior to Wednesday, it was trading at a significant premium to RSP and other Permian-focused companies.

Flatland Mineral Fund LP is offering for sale certain mineral properties located in the Delaware Basin. The company has retained TenOaks Energy Advisors as its exclusive adviser in connection with the transaction.

Offers are due at noon CST May 2. For information visit tenoaksenergyadvisors.com

SM Energy’s wraps up $500 million deal on Wyoming Assets

The Denver Business Journal reports that Denver based SM Energy Co. on Monday said it has finalized a $500 million deal to sell the majority of its assets in Wyoming’s Powder River Basin to a new Denver company run by an industry veteran.

SM said it will use the money to pay down debt and other general purposes. The deal was previously announced in January.

SM Energy sold about 112,200 largely contagious net acres in Converse, Johnson and Campbell counties, Wyo., or 80% of its Powder River acreage position, including the Frontier Formation. The company retains about 27,985 net acres, though the remaining leasehold is more scattered.

The buyer is Northwoods Operating LLC, a new company led by veteran Denver-area oilman Tom Tyree, who was co-founder, president and CFO of Arapahoe County-based Vantage Energy from 2006 to 2016 and before that was CFO of Bill Barrett Corp.

Northwoods in January said Apollo funds had committed to invest up to $850 million in the company.

SM CEO Jay Ottoson said in January the company was selling the Wyoming acreage to focus on its “top tier” assets in Texas. After the sale, SM expects its debt will be reduced from $2.5 billion to $2 billion.

SM Energy secured a strong price for its undeveloped acreage, said Brian T. Velie, a Capital One Securities analyst.

The price equates to “about 9% of SM’s enterprise value. The volumes sold represent about 2% of SM’s total third-quarter 2017 production,” he said. Velie estimated the properties will generate about $16 million of EBITDA at $50 oil and $3 gas pricing during the next 12 months.

SM Energy History

The company was founded in 1908 and incorporated in 1915.

In 1992, the company became a public company via an initial public offering.

In 2003, the company sold its assets in the Fort Chadbourne field for $17 million.

In 2008, the company sold assets to Abraxas Petroleum Corporation for $131.6 million.In January 2010, the company sold assets in the Rocky Mountains for $267 million.

In May 2010, the company changed its name from St. Mary Land & Exploration Company to SM Energy.

In 2011, the company sold a partial interest in its holdings in the Eagle Ford to Mitsui & Co..

In 2013, the company sold its assets in the Anadarko Basin for $329 million.

In 2014, the company acquired 66,000 acres in the Bakken Formation for $330 million.

In June 2015, the company sold its assets in the Arkoma Basin of Oklahoma for $270 million.

In July 2015, the company sold its 76,300 net acres of Ark-La-Tex assets to Aethon Energy and RedBird Capital.

In August 2016, the company acquired Rock Oil Holdings LLC, which owned 24,783 net acres in Howard County, Texas, from Riverstone Holdings for $980 million.

On October 18, 2016, the company announced the purchase of assets in West Texas for $1.6 billion from an affiliate of EnCap Investments and the sale of assets in the Williston Basin for $0.8 billion to Oasis Petroleum.

In 2017, the company sold assets in the Eagle Ford for $800 million.

Exxon Unit To Pay $80M In Okla. Gas Royalty Suit Settlement

An Oklahoma magistrate judge on Tuesday signed off on a settlement between an ExxonMobil unit and a class of natural gas royalty owners claiming they were stiffed by the company, with the deal including an $80 million cash payment and a $32 million award to attorneys for the class.

The settlement, originally brokered in November, ends long-running litigation in which XTO Energy was accused of underpaying royalties on natural gas wells in Oklahoma by improperly deducting production costs.

Remember When – Texas Oil Towns – Early 1900’s

The populations of many small Texas towns had even greater population increases when oil discoveries brought prospectors, investors, field laborers, and businessmen. Between 1920 and 1922, the town of Breckenridge in rural North Texas grew from about 1,500 people to nearly 30,000. Between 1925 and 1929, the town of Odessa in the Permian Basin grew from 750 to 5,000. Between 1924 and 1925, the town of Wortham in northern Texas grew from 1,000 to about 30,000. The town of Kilgore in eastern Texas grew from about 500 to 12,000 between 1930 and 1936 following the discovery of the East Texas field.

EIA & API REPORT SUMMARY

The U.S. Energy Information Administration (EIA) released its weekly petroleum status report Wednesday morning, showing that U.S. commercial crude inventories increased by 1.6 million barrels last week, maintaining a total U.S. commercial crude inventory of 429.9 million barrels. The commercial crude inventory remains in the lower half of the average range for this time of year.

Tuesday evening the American Petroleum Institute (API) reported that crude inventories rose by about 5.3 million barrels in the week ending March 23. Gasoline inventories fell by 5.6 million barrels, and distillate stockpiles decreased by 2.2 million barrels. For the same period, analysts expected inventories to remain about flat.

U.S. crude oil exports rose by 5,000 barrels a day last week, and U.S. production rose by 26,000 barrels a day to 10.43 million barrels. Exports averaged 1.58 million barrels a day last week and have a cumulative daily average for the year of 1.49 million barrels a day, a 92% increase over the year-ago export total.

For the past week, crude imports averaged over 8.1 million barrels a day, 1.1 million higher compared with the previous week. Refineries were running at 92.3% of capacity, with daily input averaging about 16.8 million barrels a day, about 18,000 more than the previous week’s average. Exports of refined products fell by 80,000 barrels a day last week to 4.91 million.

WTI’s discount to Brent WTCLc1-LCOc1 has grown to more than $5 a barrel, the biggest since January, making Brent-linked crudes less attractive to refiners.

Oil has risen about 4 percent since January, on track for the longest stretch of quarterly gains since late 2010.

NAT GAS NEWS

The U.S. Energy Information Administration reported Thursday that domestic supplies of natural gas fell by 63 billion cubic feet for the week ended March 23. Analysts surveyed by S&P Global Platts had forecast a decrease of 70 billion, while the five-year average withdrawal is 46 billion. Total stocks now stand at 1.383 trillion cubic feet, down 672 billion cubic feet from a year ago, and 346 billion below the five-year average, the government said.

May natural gas NGK18, closed Thursday at $2.733 per million British thermal units.

Friday Snippets

Cold temperatures and extended winter weather pushed US natural gas inventories about 19% below the five-year average, providing some price support, but booming natural gas production threatens to limit price increases in the coming months, according to the Energy Information Administration. The EIA expects US dry gas production to climb by 8.1 billion cubic feet per day to an all-time record of 81.7 billion cubic feet per day this year, while Henry Hub spot prices should average $2.99 per million British thermal units in 2018.

Mexico sees oil, gas reserves shrink

Mexico’s proven oil and natural gas reserves declined more than 7% to 8.483 billion barrels of crude oil equivalent at the beginning of 2018 compared with the same period last year, according to Mexico’s National Hydrocarbons Commission. On the bright side, Mexico is starting to see the first-ever certification of reserves contributed by private companies following its 2013 energy reform that opened the doors to foreign and private companies.

Locomotive shortage latest hurdle for Canadian crude producers

Insufficient pipeline space prompted Canadian crude producers to increase crude-by-rail shipments, but a shortage of locomotives is keeping oil-by-rail terminals operating below capacity. Rail companies will likely resist adding more locomotives unless producers make long-term commitments to shipping by rail because “[i]t is difficult to justify investing in long-life assets like rail and locomotives based on short-term demand,” Canadian Pacific Railway said.

Devon Energy to accelerate divestment program

US shale player Devon Energy is seeking to divest up to $5 billion worth of assets as part of its effort to simplify its portfolio and increase its focus on three shale regions: the Permian Basin, the SCOOP/STACK and the Rocky Mountain area. “We’re going to be a lean, efficient company that drives high returns,” said Devon President and CEO Dave Hager.

Pemex, Lewis Energy partner to develop Mexico shale gas deposit

Pemex has sealed a contract with US company Lewis Energy for the exploration and production of a shale gas deposit in the Olmos field in the Mexican state of Coahuila. About $617 million will be invested in the field under the contract, with Pemex targeting natural gas production of approximately 117 million cubic feet per day by 2021.

WPX Energy CEO paints bright picture of future oil demand

The rise of electric vehicles will have limited impact on global oil demand, said WPX Energy Chairman and CEO Rick Muncrief, who believes crude oil demand will remain strong for the foreseeable future. “I’m more bullish on the future of our commodity (oil) than I have been for some time,” Muncrief said at a Scotia Howard Weil conference in New Orleans.

Hurdles emerge for West Texas frac sand mining boom

Factors including water shortages, harsh weather conditions and equipment failures have forced Permian Basin sand miners to shut down some facilities and delay construction, resulting in supply constraints. “We expect logistical bottlenecks in the form of trucking, as well as customer preference (more 100 mesh supply than demand), to limit the proliferation of Permian sand,” said financial services firm Cowen.

Lack of pipeline capacity leaves West Texas gas with no place to go

Natural gas from West Texas’ Permian Basin is trading 30% below last year’s levels, overtaking Marcellus Shale gas as the cheapest in the US as a shortage of pipeline capacity and rising production levels create a glut that’s putting pressure on prices. Drillers’ inability to sell their gas may also force them to cut oil production, and Kyle Cooper, a consultant for Ion Energy Group, says prices for Permian gas could reach zero in the next three to four weeks because the gas is “literally a byproduct.”

Energy Hunter to gain property in Texas oil play

Energy Hunter Resources will acquire 8,817 gross acres in the Permian Basin’s San Andres oil play in Texas from Lubbock Energy Partners. The deal involves 201 production, wastewater and shut-in wells and infrastructure in Cochran County.

March 23, 2018

SandRidge Energy Rejects Midstates Petroleum’s Buyout Offer

Oklahoma City based oil and gas producer SandRidge Energy Inc. (NYSE:SD) announced it had rejected Midstates Petroleum (NYSE:MPO)’s all-stock bid on Monday, saying it was highly dilutive.

Tulsa, Oklahoma-based Midstates suggested combining the two companies in a stock-for-stock merger at a 60-40 exchange ratio, meaning SandRidge’s shareholders would own 60% of the combined company.

Although SandRidge dismissed Midstates’ offer, it did say it had received interest from other companies as well. While it did not disclose which companies had submitted proposals, the board will begin reviewing these offers in order to maximize shareholder value. In a statement, President and CEO Bill Griffin commented on the offers.

NewsOK’s Adam Wilmoth reported SandRidge had indicated the rejection was based largely on “significantly differing opinions” of Midstates’ reserves and the number of economically viable drilling locations at current oil and natural gas prices. SandRidge directors also rejected Midstates’ claim that the merger would result in flat production and free cash flow of $320 million to $400 million over the next four years.

“For these and other reasons, SandRidge has concluded that accepting Midstates’s proposal would be highly dilutive and not in the best long-term interests of SandRdige stockholders,” the company said in a statement Monday afternoon.

Asset Sales Abound

They say everything comes in 3’s. Apparently, oil and gas asset sales are no different.

Forbes contributor Claire Pool reported in a story this week, that earlier this month, Devon Energy sold properties in North Texas’ Barnett Shale for $553 million, which analysts said represented a “relatively attractive” multiple of cash flow.

Last week Pioneer Natural Resources and Reliance Industries agreed to sell some of their oil and gas properties in South Texas’ Eagle Ford Shale to Australia’s Sundance Energy for $221.5 million.

And on Tuesday EnerVest said it agreed to sell its Eagle Ford and Austin Chalk properties for $2.66 billion in cash and stock to special purpose acquisition entity TPG Pace Energy Holdings, which will be renamed Magnolia Oil & Gas and be led by former Occidental Petroleum CEO Steve Chazen.

Now that oil prices seem to have solidified above $60 per barrel, oil and gas companies are beginning to shed some of their more valuable non-core assets to pay down debt and fund their more profitable plays. At least nine publicly traded companies are expected to sell properties over the next six months, according to analysts at Tudor, Pickering, Holt.

Biggest US offshore lease sale attracts little interest

The largest US auction of offshore oil and natural gas drilling rights attracted limited interest from companies, which submitted $124.76 million in winning bids that accounted for just 1% of the 77 million acres made available in the Gulf of Mexico. The average bid per acre was $153, down 35% from last year’s levels, with critics partly blaming the bad timing of the auction for the weak results.

The Interior Department’s Bureau of Ocean Energy Management, which administered the auction, characterized the results as robust: “I think we’re seeing continued consistent investment in the Gulf of Mexico,” BOEM spokesman Mike Celata said in a conference call with reporters, adding he forecast increasing oil and gas production from the region for years.

He said 33 companies, including majors Royal Dutch Shell Plc, BP Plc, Chevron Corp, and Total SA, had placed 159 bids on 148 blocks.

Remember When 1950 – Glenn Herbert Mc­Carthy, the Wildcatter.

He was the personification of Houston, Texas, USA, 1950. Feast and famine, gusher and duster, whenever two people got together to fight or wheel or deal or all of the above, one of them was a smiling Irishman with curly brown hair and a dark mustache—Glenn Herbert Mc­Carthy, the Wildcatter.

By the time McCarthy was 26, he had found two oil fields and extended a third. By the time he was 30, McCarthy rather had the hang of it.

In 1940, McCarthy struck again, this time in League City south of Houston. He hit it big.

Time had him on its cover for February 13, 1950—the King of the Wildcatters.

EIA & API REPORT SUMMARY

U.S. crude oil stockpiles fell unexpectedly last week as imports dropped and refining rates jumped, while gasoline and distillate inventories also declined, the Energy Information Administration said on Wednesday.

The U.S. Energy Information Administration (EIA) released its weekly petroleum status report, showing that U.S. commercial crude inventories decreased by 2.6 million barrels last week, maintaining a total U.S. commercial crude inventory of 428.3 million barrels. The commercial crude inventory remains in the lower half of the average range for this time of year.

Tuesday the American Petroleum Institute (API) reported that crude inventories fell by about 2.7 million barrels in the week ending March 6. Gasoline inventories fell by 1.07 million barrels and distillate stockpiles decreased by 1.93 million barrels. For the same period, analysts had consensus estimates for an increase of 2.6 million barrels in crude inventories, a decrease of about 2 million barrels in gasoline inventories and an increase of 1.2 million barrels in distillate stockpiles.

Oil prices fell on Thursday as investors took profits after this week’s rally and as U.S. stock markets fell, but losses were limited by the continuing efforts of OPEC and its allies to curb supplies.

Brent crude LCOc1 futures fell 56 cents to settle at $68.91 a barrel, a 0.8 percent loss, having retreated from a session peak of $69.70, close to its highest level since early February.

U.S. West Texas Intermediate (WTI) crude CLc1 futures fell 87 cents to settle at $64.30 a barrel, a 1.3 percent loss. WTI traded between $64.23 a barrel and $65.74 a barrel during the session.

NAT GAS NEWS

Natural-gas prices struggle to hold gains as U.S. natural-gas supply falls as expected

Storage dipped at a much larger rate than the five-year average last week as the injection season is on track to begin at its second-lowest level of the past decade.

US natural gas in storage decreased 86 Bcf to 1.446 Tcf in the week ended March 16, the US Energy Information Administration reported Thursday.

The withdrawal was slightly less than an S&P Global Platts’ survey of analysts calling for an 87 Bcf withdrawal. Responses to the survey ranged from a withdrawal of 77 Bcf to 95 Bcf. The pull was less than the 137 Bcf withdrawal reported during the corresponding week in 2017 but more than the five-year average pull of 53 Bcf, according to EIA data. It was the first time in a month the draw was not less than the five-year average.

April natural gas NGJ18, closed Thursday at $2.617 per million British thermal units.

Friday Snippets

US petroleum demand flirts with record highs

Demand for gasoline and heating fuels drove US petroleum consumption to 20.3 million barrels per day in February, marking an increase of more than 1 million barrels per day from February 2017 and approaching record levels not seen in over a decade, according to the American Petroleum Institute. “With US oil and NGL production at record levels — and a resilient industry value chain that has absorbed the growth — consumers are benefiting from this momentum and enjoying affordable and reliable fuels made right here at home,” said API Chief Economist Dean Foreman.

Marcellus producers brace for wave of pipeline openings

Several pipeline projects are expected to enter service in the next 12 months in the Marcellus Shale, but the competition among developers is so fierce some are having trouble getting minimum volume commitments from producers. As an alternative to MCVs, some pipeline operators are opting to pay for acreage dedications even though this often means buying a producers’ existing assets at a premium, according to Eureka Midstream President and Chief Operating Officer Chris Akers.

Wis. frac sand industry stages comeback

US crude oil production growth and an expected surge in domestic frac sand demand is helping fuel a rebound in Wisconsin’s frac sand industry, which was forced to shut down mines and cut hundreds of jobs during the downturn. Despite Wisconsin’s industry facing rising competition from Texas mines, Ryan Carbrey, senior vice president and analyst for Rystad Energy, expects demand to grow so significantly that “there won’t be a negative impact on white sand,” and he even sees the price of northern white sand rising 10% to 12% this year.

Challenges loom for Permian’s gas production surge

Natural gas production in the Permian Basin hit a record of about 7.2 billion cubic feet per day earlier this month, but market constraints and a lack of infrastructure threaten to kill the momentum. As gas supplies from the Anadarko and San Juan basins increasingly meet demand in the Midwest and Southwest, Permian producers will be forced to look to eastern markets, but eastbound pipeline capacity from the Permian is limited at just 2.8 billion cubic feet per day.

Data analytics to spearhead 2nd Permian shale boom

As the Permian Basin prepares to unleash a second wave of the shale revolution, operators will need to work together and exploit the power of data analytics to get the most out of their assets, according to CrownQuest Operating data scientist and geophysicist Lewis Matthews. Matthews says enhanced oil recovery efforts could increase recovery factors in the Permian Basin from about 12% to roughly 50%.

Explorers, servicers fight over data ownership in the oil patch

As the oil and natural gas industry attempts to make better use of the data it generates, the stakes are high for both producers and servicers, who are caught in a battle over ownership of the data produced by oilfield equipment. Some companies have started to rewrite their service contracts to include clauses trying to determine “what parts are the contractor, what parts are the operator, when there’s overlap, how that’s divided up,” said Devon Energy Vice President of Drilling Garrett Jackson.

IEA: Global oil demand growth to offset US shale surge

The International Energy Agency forecast that global oil demand would jump by 1.5 million barrels per day to hit 99.3 million barrels per day this year, enough to maintain market balance in the wake of an anticipated 1.5-million-barrel-per-day increase in US crude production. “The market rebalancing is clearly moving ahead with … supply and demand becoming more closely aligned,” the IEA said in its monthly report.

Buyer Worries Lead Augustus Energy To Seek Ch. 11 Sale

Colorado natural gas well developer Augustus Energy Resources LLC told the Delaware bankruptcy court on Sunday that it wants to hold a Chapter 11 auction of its assets, saying it is dealing with $78 million in debt, depressed energy prices and a $3.7 million class action over royalties.

The legacy of API’s Jack Gerard

During his career representing the oil and natural gas industry as well as the coal and mining sectors, American Petroleum Institute President and CEO Jack Gerard has made a name for himself as the man who helped change the face of modern lobbying and elevate the role of trade associations from mere event organizers to active advocates. In August, Gerard will retire after 10 years at the helm of API, and he said he desires to leave behind a legacy of respect.

Tellurian gauges shipper interest for new Permian gas pipeline

Tellurian is assessing shipper support for its proposed Permian Global Access Pipeline, which would carry 2 billion cubic feet of natural gas per day from the Permian Basin to southwest Louisiana once it comes online by 2022. The $3.7 billion, 625-mile pipeline would supply gas to Tellurian’s Driftwood liquefied natural gas export terminal.

Magellan shelves plan for Texas crude pipeline

Magellan Midstream Partners has decided to abandon plans for a 375-mile pipeline that would have transported up to 600,000 barrels per day of crude oil and condensate from the Permian Basin and Eagle Ford Shale to Corpus Christi, Texas, and the Houston Ship Channel. “The open season closed on March 1, and we have not received adequate commitments to proceed with the project at this time,” said Magellan spokesman Bruce Heine.

US sells leases for oil, gas projects in Utah

Energy companies submitted winning bids for all 43 southeastern Utah parcels available for oil and natural gas development in a lease auction Tuesday, the Bureau of Land Management said. The auction of over 21,000 hectares, including areas near the Bears Ears National Monument and other environmentally and culturally sensitive sites, brought in $1.56 million.

March 16, 2018

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U.S. drillers boost oil hedging to guarantee 2018 shale surge

U.S. shale drillers have locked in higher prices for almost half of the oil they plan to pump this year, with oil hedges climbing above the historical average as producers take advantage of $60 a barrel oil.

After the fourth quarter, U.S. oil companies increased their 2018 oil hedges to 48 percent, up from 30 percent after the third quarter, Goldman Sachs said in a new report.

The bank said the increased protection on future production will mean these drillers can boost their output and avoid spending more cash than they’re generating, one major goal investors have set for the U.S. shale industry this year.

Most U.S. shale oil companies, Goldman said, have hedged more than 50 percent of their 2018 oil production.

Credit: Houston Chronicle | March 13, 2018

Oil majors give in to investors with share buyback spree

(Reuters) – After almost three barren years for investors who have poured millions into the U.S. oil sector, producers are finally opening the floodgates to a wave of share buybacks that will return money to shareholders this year.

U.S. oil production topped 10 million barrels per day earlier this year, approaching a record set in 1970, but until recently many investors in the shale oil revolution were still waiting for their payday.

Since the beginning of year, 11 companies have promised buybacks, with six alone in the past three weeks including Devon Energy (DVN.N), Hess Corp (HES.N) and Noble Energy Inc (NBL.N). In all, companies have committed to buy back about $3.6 billion worth of shares since February.

The United States’ second largest producer Chevron Corp (CVX.N) also weighed in last week, hinting it would start buying back shares if it produced stronger cash flow in 2018.

The payouts come courtesy of a combination of higher and more stable oil prices and pressure from investors.

Before oil started to take a downturn in 2014, energy companies had spent billions of dollars in exploration and new projects. When oil fell below $30, producers in North America sought to raise cash by selling more shares, pushing down stock prices.

Wall Street finally put its foot down last year, with investors demanding a shift to dividends and share buybacks. Exxon Mobil (XOM.N) was punished for ignoring the demands and focusing on its expansion plans.

Reacting to market sentiments, Hess and Devon said they would either buy back $1 billion worth of shares, or add that much to existing programs. Anadarko added a further $500 million to its $2.5 billion-share buyback program, while Noble Energy authorized a repurchase of $750 million.

Midstates executives say SandRidge merger would be good for both

By Adam Wilmoth The Oklahoman Mar 14, 2018

A merger between Tulsa-based Midstates Petroleum Co. and Oklahoma City-based SandRidge Energy Inc. would benefit shareholders of both companies, Midstates executives said Tuesday.

“Even with our confidence in the future for Midstates as a stand-alone company, we believe there are significant benefits from an at-market, all-stock merger with SandRidge,” Midstates CEO David Sambrooks said in a statement Tuesday.

“Combining these two companies would form a stronger, more formidable company and deliver undeniable benefits to all stakeholders. The strategic fit and geographic overlap of both companies’ assets in the Mid-Con (Mid-Continent region) builds critical mass, creates significant synergies and generates attractive risk-adjusted returns while having options for growth in the Miss Lime, NW STACK and North Park assets.”

Midstates last month publicly announced the merger deal Sambrooks first proposed to SandRidge executives in January. Under terms of the proposal, Sambrooks would be CEO of the combined company.

Oil development costs decline as operators focus on value over growth

US shale producers in the lower 48 states as well as offshore drillers continue to achieve significant cost savings and lower break-even points, which is partly thanks to a shift in mentality that’s making oil operators focus more on value than on volume, according to Wood Mackenzie analyst Harry Paton.

Ninety-five years ago this May, the first commercial oil well drilled in West Texas, known as the Santa Rita No. 1, came roaring to life. The moment was announced by a thunderous rumble as pressure from deep beneath the earth’s surface forced the long-trapped liquid skyward, spewing over the rig’s crown block in an arc that left the red dirt stained black more than two hundred yards away. The gusher signaled the discovery of the most lucrative oil reserve in North America and has fueled the dreams of Permian Basin wildcatters ever since.

In 1990, after almost sixty-seven years of production, the Santa Rita No. 1 was finally plugged.

EIA & API REPORT SUMMARY

The U.S. Energy Information Administration said crude supplies rose by 5 million barrels for the week ended March 9. Analysts surveyed by S&P Global Platts had forecast a climb of 2.5 million barrels, while the American Petroleum Institute on Tuesday reported a rise of nearly 1.2 million barrels. Gasoline stockpiles, however, dropped 6.3 million barrels for the week, while distillate stockpiles lost 4.4 million barrels, according to the EIA.

OIL AND GAS PRICES

Oklahoma crude oil prices as of 5 p.m. Thursday:

Oklahoma Sweet:

Sunoco Inc. — $57.75

Oklahoma Sour:

Sunoco Inc. — $45.75

Oil edges up but rising crude supply checks gains

Oil prices edged higher in choppy trade on Thursday after the International Energy Agency said global oil demand is expected to pick up this year, but warned supply is growing at a faster pace.

Prices notched their second consecutive day of gains, as West Texas Intermediate (WTI) crude futures rose 23 cents to settle at US$61.19 a barrel, a 0.4 per cent gain. Brent crude futures rose 23 cents to settle at US$65.12 a barrel.

NAT GAS NEWS

It’s not looking like that great of a day for the world of natural gas prices. Despite three nor’easter storms pounding the Northeast, the U.S. Energy Information Administration (EIA) weekly natural gas storage report showed a drawdown of 93 billion cubic feet in natural gas supplies for the week ending March 9.

Dow Jones had called for a drawdown of 99 billion cubic feet, and S&P Platts had an estimate for a 100 billion cubic feet drawdown, after dropping 57 billion cubic feet last week.

Total natural gas stocks are now at 1.532 trillion cubic feet. That figure is apparently down by 718 billion cubic feet from a year ago.

April natural gas NGJ18, closed Thursday at $2.681 per million British thermal units.

Located primarily in Oklahoma’s Canadian, Kingfisher and Blaine counties, the STACK has become one of the best emerging development plays in North America. Devon’s position of more than 600,000 net acres combines some of the best attributes of its Eagle Ford and Delaware positions. Like the company’s Eagle Ford asset, its STACK acreage is contiguous and located in the over-pressured oil window, the economic heart of the play. And like the company’s position in the Delaware Basin, Devon has tremendous stacked pay opportunities with multiple landing intervals in the Meramec, Osage and Woodford.

Devon’s operations in the STACK are currently focused in the oil-prone Meramec and the liquids-rich Cana-Woodford Shale. Recent well-completion design enhancements have continued to improve economics which are among the highest in the company’s portfolio.

Closing Thought: You don’t concentrate on risks. You concentrate on results. No risk is too great to prevent the necessary job from getting done.”
–Chuck Yeager

Have a great weekend from Oklahoma Minerals!

Talk soon,
Gib Knight

Friday Snippets

Merlin Partners Seeks Rice Energy Stock Appraisal In Del.

Hedge fund Merlin Partners LP asked Delaware’s Chancery Court Thursday to determine how much its stake in Rice Energy Inc. is worth, now that a contentious $6.7 billion merger between Rice and fellow natural gas producer EQT Corp. has wrapped up

Magellan Midstream mulls expansion of Texas products pipeline

Magellan Midstream Partners is holding an open season until May 9 to assess customer interest for a proposed expansion of the western leg of its Magellan South System in Texas from the current 100,000 barrels per day to 140,000 barrels per day. The expansion of the refined products pipeline could enter service by mid-2020

Booming US oil exports spell trouble for OPEC’s balancing act

As US crude gains ground in Asia, some OPEC nations could be compelled to increase output to protect their market share in the region, jeopardizing OPEC’s production cut deal that helped oil prices climb over 40% since June, according to Dutch bank ING Groep. ING forecast that Brent crude prices will fall to $57 per barrel in the second half of the year.

ConocoPhillips benefits from strategic approach, CEO says

ConocoPhillips CEO Ryan Lance said the company has taken its time in the Eagle Ford Shale in Texas because some areas require different types of technology for drilling and completing wells. The careful, strategic approach, which the company plans to use in other basins, has allowed ConocoPhillips to maximize its investment, Lance says.

US positions itself as one of world’s top gas liquids producers

The shale revolution has helped the US become one of the world’s biggest producers of natural gas liquids, with output of over 4 million barrels per day, accounting for about one-third of the global NGL market, according to Bank of America Merrill Lynch. “Domestic and international demand trends could remain strong, as U.S. shale producers seem to be sitting on a bottomless supply of NGLs,” the company’s analysts said.

Ohio’s natural gas production jumps, but oil declines

Natural gas production from Ohio’s Utica Shale climbed 24% in 2017 to 1.7 trillion cubic feet of natural gas, with Belmont County as the top producer with 779 billion cubic feet, according to the Ohio Department of Natural Resources. Meanwhile, oil output in the state slumped 9% to 16.4 million barrels last year.

Texas’ oil, gas industry gains momentum

Texas’ upstream oil and natural gas industry expanded for a 14th consecutive month in January, with the Texas Alliance of Energy Producers’ Texas Petro Index up 25% year-on-year to 192.7. Estimated January crude production in Texas rose 21.9% from a year earlier to 119.4 million barrels, while the number of active drilling rigs was up 35.7% from January 2017 to 456.

N.D. oil output posted smaller-than-expected decline in Jan.

North Dakota produced an average of 1.17 million barrels of oil per day in January, a drop of roughly 7,000 barrels per day from December, while natural gas production was down less than 1% from December at over 2 billion cubic feet per day. Oil production in the state is expected to break the 1.2-million-barrel-per-day record in May or June.

N.M. shattered oil production records in 2017

New Mexico produced an all-time high of 172 million barrels of oil in 2017, smashing the previous record of 147 million barrels set in 2015, according to the Energy Information Administration. In February, US drillers likely pumped 10.3 million barrels per day on average, according to federal estimates.

OPEC lifts its US oil production forecast for 2018

Non-OPEC oil production will likely rise by 1.66 million barrels per day in 2018, outpacing an anticipated 1.6-million-barrel-per-day increase in global demand, with 1.46 million barrels per day of the growth coming from the US, according to OPEC’s latest monthly report. The 1.66-million-barrel-per-day supply growth forecast represents an increase of 260,000 barrels per day from OPEC’s outlook released last month.

March 9, 2018

US shale oil production is rising faster than refineries can handle

Surging US shale production could create bottlenecks at US Gulf Coast ports and refineries because there’s simply not enough infrastructure to handle the additional barrels of oil, according to a report by Wood Mackenzie. US shale firms are expected to boost output by 4 million barrels per day over the next five years, but current refining capacity can take in only 900,000 to 1 million barrels per day of the extra volume, which means three-quarters of the additional US crude must head overseas.

U.S. refiners prefer to run medium and heavy crudes and will not be able to handle all the additional light crude. The U.S. has been slow to add processing capacity because demand for gasoline is forecast to decline.

Since at least 2014, ExxonMobil Corp has considered an expansion of light-crude refining capacity at a Beaumont, Texas, refinery but has yet to approve the project.

About half of the new, mostly-light U.S. oil output will come from the Permian Basin in West Texas and New Mexico, according to John Coleman, Wood Mackenzie’s senior analyst for North American crude oil markets.

HOUSTON (Reuters) – Energy executives say the Trump administration’s proposed steel and aluminium tariffs could bump up the cost of big-ticket projects needed for rapidly rising U.S. shale oil and gas output by three to 10 percent.

Higher construction costs could slow growth in production and exports of crude and natural gas from shale that has made the United States the world’s largest gas producer and second largest oil producer.

President Donald Trump’s proposal is emerging as a potential spoiler for new U.S. pipelines, drilling rigs, offshore platforms and refineries to handle coming oil and gas production. Companies including Exxon Mobil Corp (XOM.N), Kinder Morgan Inc (KMI.N) and others have outlined tens of billions of dollars of new steel-intensive petrochemical and pipeline expansions in the United States.

Steel accounts for as much as 30 percent of new drilling project costs. While higher costs would not halt new drilling in U.S. shale fields, “it could slow it down,” Jim Burkhard, vice president of oil research for consultancy IHS Markit, said in an interview.

Some pipeline projects could be hamstrung if developers cannot buy parts made outside of the United States, said Greg Armstrong, CEO of energy storage and transport company Plains All American Pipeline (PAA.N). His firm has about $1.5 billion in steel-intensive projects on the drawing board, and some of the steel required is not made domestically.

“It’s a thornier issue than is printed in the headlines,” said Armstrong. “If you can’t get what you need, you kind of have to go somewhere else” outside the United States, he said.

Devon Energy Corp. announced today it has entered into a definitive agreement to sell the southern portion of its Barnett shale position for $553 million. The transaction is subject to customary terms and conditions and is expected to close in the second quarter of 2018.

After first acquiring a substantial position in the shale play in 2002, Devon was the first to apply horizontal drilling techniques in the Barnett Shale, according to the company website. Since then, the company said it has drilled more than 5,000 wells in the Barnett.

“Combined with other recent asset sales, divestiture proceeds associated with our 2020 Vision have now reached $1 billion,” said Dave Hager, president and CEO. “In conjunction with this asset sale, and consistent with our strategic plan, we announced today in a separate release that our board has authorized a $1-billion share-repurchase program and a 33% increase in Devon’s quarterly cash dividend. We are very confident about Devon’s future and, as market conditions permit, we will continue to pursue opportunities to further increase cash returns to our shareholders.”

Halliburton strengthens position as world’s leading fracking provider

Halliburton added 700,000 horsepower to its pressure pumping fleet in the past year, bringing its total capacity to more than 4 million horsepower, according to a Rystad Energy report. Surging demand for oilfield services across US shale patches prompted US fracking firms to expand their fracking fleets by 3.3 million horsepower last year, and the companies are on track to add another 3.3 million horsepower this year, Rystad said in its report.

The rise in demand for fracking could increase spot prices for pressure pumping between 10 percent and 25 percent in the second quarter, squeezing margins that U.S. drillers make on bringing wells into production.

Founded in 1919, Halliburton is one of the world’s largest providers of products and services to the energy industry. With over 50,000 employees, representing 140 nationalities in approximately 70 countries, the company helps its customers maximize value throughout the lifecycle of the reservoir – from locating hydrocarbons and managing geological data, to drilling and formation evaluation, well construction and completion, and optimizing production throughout the life of the asset.

Halliburton rival Schlumberger, the largest oil field service company, has signaled plans to increase its frack fleet by 1 million horsepower by refurbishing equipment it purchased from Weatherford International. Other rivals BJ Services and Pro Frac expect to increase their fleets by a combined 2.7 million horsepower this year.

Remember When -Halliburton – The Early Days

In 1919, Erle P. Halliburton started the New Method Oil Well Cementing Company. In 1920, he brought a wild gas well under control, using cement, for W.G. Skelly, near Wilson, Oklahoma. On March 1, 1921, the Halliburton “method and means of excluding water from oil wells” was assigned a patent from the U.S. Patent Office. Halliburton invented the revolutionary cement jet mixer, to eliminate hand-mixing of cement, and the measuring line, a tool used to guarantee cementing accuracy. By 1922, the Halliburton Oil Well Cementing Company (HOWCO) was prospering from the Mexia, Texas oil boom, having cemented its 500th well in late summer.

In 1924, the company was incorporated in Delaware, with 56 people on its payroll. The stock of the corporation was owned by Erle and Vida Halliburton and by seven major oil companies: Magnolia, Texas, Gulf, Humble, Sun, Pure and Atlantic.

EIA & API REPORT SUMMARY

U.S. crude stocks rose less than expected last week while inventories at the key Cushing, Oklahoma storage hub fell for an 11th straight week, according to data released by the Energy Information Administration on Wednesday.

Crude inventories rose by 2.4 million barrels in the week, which was less than the 2.7 million barrel increase analysts had forecast.

Crude stocks at the Cushing, Oklahoma, delivery hub fell 605,000 barrels, EIA said. Inventories have dropped to the lowest level since late 2014 as outages on key pipelines have limited supplies to the hub and as the start up of a new pipeline increased outflows.

Oil prices pared losses after the data as most market participants had expected a bigger increase in inventories amid refinery maintenance season.

WTI crude oil prices settled sharply lower as traders continued to fret rising U.S. production while a stronger dollar added to downside momentum.

On the New York Mercantile Exchange crude futures for April delivery fell 1.68% to settle at $60.12 a barrel, while Brent crude futures fell 73 cents, or 1.1 per cent, to settle at $63.61 per barrel.

Brent was on track for a drop of around 0.8 per cent this week, after last week’s 4.4 per cent slide. WTI was on track for a 1.5 per cent decline after a 3.6 per cent slide last week.

“It looks to me that crude has peaked and it’s heading lower,” said Walter Zimmerman, chief technical analyst at United-ICAP. “I see it heading back to test the early February lows, $57 for WTI and $62 for Brent. And I’m not at all confident that those levels are going to hold,” he said.

NAT GAS NEWS

The U.S. Energy Information Administration reported Thursday that domestic supplies of natural gas fell by 57 billion cubic feet for the week ended March 2. Analysts surveyed by S&P Global Platts had forecast a decrease of 59 billion, but the five-year average withdrawal is 129 billion.

Total stocks now stand at 1.625 trillion cubic feet, down 680 billion cubic feet from a year ago, and 300 billion below the five-year average, the government said.

April natural gas NGJ18, closed Thursday at $2.756 per million British thermal units.

52WK RANGE
$2.487 – $3.010

DEVON Energy STACK Play Activity – Blaine County

Closing Thought: A problem is a chance for you to do your best. ~Duke Ellington

Have a great weekend from Oklahoma Minerals!

Talk soon,
Gib Knight

Friday Snippets

QEP Resources going all-in on the Permian

QEP Resources is looking to sell its assets in the Williston and Uinta basins as well as the Haynesville Shale as the company increases its focus on the Permian Basin. “The initiatives will allow us to simplify our portfolio, streamline our operations, and sharpen our focus on our Permian basin assets, quickly resulting in QEP becoming a leading pure-play Permian company,” QEP Chairman, President and CEO Chuck Stanley said.

Preferred Sands opens first Texas sand mine

Commercial operations have begun at Preferred Sands’ first Texas sand mine, the Atascosa plant, which will produce about 3.3 million tons of 40/70 and 100 mesh sand per year and serve hydraulic fracturing operations in the Eagle Ford Shale. The company intends to open a second plant “in the near term” near Monahans, Texas, to provide sand to operators in both the Permian Basin and the Eagle Ford.

IEA: US to claim world’s No. 1 oil producer status in 2023

The International Energy Agency predicts that US oil production will hit a record of 12.1 million barrels per day in 2023, making the US overtake Russia as the world’s biggest oil producer. Global production is expected to increase by 6.4 million barrels per day by 2023, with the US accounting for nearly 60% of the new oil, while American oil exports are seen more than doubling to 4.9 million barrels per day.

Goodrich to kick off fracking at next 2 Haynesville Shale wells

Goodrich Petroleum has recently completed two wells in the Haynesville Shale, pushing its production to about 60 million cubic feet of gas equivalent per day, and is slated to start hydraulic fracturing at its next two wells in the region this month. Goodrich is using proceeds from the sale of its acreage in the Angelina River Trend in East Texas to fund the completion program.

US crude exports to Asia to decline as WTI discount narrows

Shipments of US crude oil to Asia declined from 676,190 barrels per day in January to approximately 560,000 barrels per day in February, while the number for March could be around 290,000 barrels per day, writes Clyde Russell, citing vessel-tracking and port data. The decline in exports stems from the narrowing discount of West Texas Intermediate to Brent, which shrank from $7.07 per barrel in late September 2017 to $3 on March 1, the smallest spread in seven months.

Chevron explores strategic options for Canada LNG project

Chevron is considering selling a stake in its Kitimat liquefied natural gas project in British Columbia, Canada, either to a natural gas producer or a financial investor such as a private equity firm or pension fund, according to sources. Petronas and Seven Generations Energy are among the parties Chevron is reportedly in talks with.

Chevron can thank shale for best reserve replacement ratio in years

Chevron’s organic reserve replacement ratio was 161% last year, the strongest performance since at least 2013, which can be attributed to its US operations, particularly in the Permian Basin, writes Liam Denning. In the US, Chevron added nearly four barrels of oil to proved reserves for every one barrel produced.

Occidental to expand capacity of Ingleside terminal in Texas

Occidental Petroleum’s Ingleside terminal at the Port of Corpus Christi in Texas will undergo a capacity expansion from 300,000 barrels per day to 750,000 barrels per day by the second half of next year as the company seeks to capture a larger share of the oil export market. The terminal will be able to partially load supertankers later this year after the installation of its Very Large Crude Carrier loading arms is complete.

Hess CEO: US shale continues to expand its global footprint

Hess CEO John Hess believes US shale output will continue to grow and come to account for the bulk of new global oil production, whereas oil output from the US Gulf of Mexico will stagnate. Shale “will be resilient in a $50 world and we are in a $60 world,” Hess said at the CERAWeek conference in Houston.

Cabot is most productive Marcellus Shale operator

An analysis by private equity firm Baird Equity Research identified Cabot Oil & Gas as the most productive operator in the Marcellus Shale, followed by EQT and Consol Energy. Cabot’s average revenue per well increased by $5.1 million over the past two years, while EQT and Consol saw average revenues jump by $3.8 million per well and $2.7 million per well, respectively.

March 2, 2018

EARNINGS NEWS

EOG gets massive boost from Trump’s tax overhaul

Shale driller EOG Resources posted a $2.4 billion profit in the fourth quarter — compared with a $142 million loss a year earlier — after benefiting from a $2 billion windfall resulting from President Donald Trump’s tax overhaul. “EOG emerged from the industry downturn in 2017 with unprecedented levels of efficiency and productivity, driving oil production volumes to record levels with capital expenditures approximately one half the prior peak,” EOG Chairman and CEO Bill Thomas said.

The big profit – still about $400 million without the assist from the tax law – compares favorably to a $142 million loss during the fourth quarter of 2016. EOG’s quarterly revenues jumped almost 40 percent from last year up to $3.34 billion.

As such, EOG is increasing its dividend payouts to investors by more than 10 percent and potentially hiking its capital spending by more than 40 percent in 2018.

Continental Hits The Accelerator

Condensed from an article reported on Seeking Alpha

Continental Resources (CLR), continues to make progress to revive the business and its share price, although investors are still considerably underwater compared to the 2014 peak.

The company is back in full swing, as it is growing earnings and production, while lack of oil hedges and tax reform provides a further boost to the earnings and cash flow generating power of the business.

The rise of Continental has been very impressive, as production jumped from 50,000 BOE in 2010 to more than 200,000 BOE in 2015, after which it actually fell a bit in 2016 after the company hit the brakes on capital spending. Production has just reached a fresh record in 2017 and came in at 242,000 BOE for the year.

For 2018, the company has outlined a $2.3 billion capital spending program (compared to $2.0 billion in 2017), sufficient to boost 2018 production to 285,000-300,000 BOE, with a projected exit rate of 310,000 BOE, plus or minus 5,000 BOE. It should be said that Q4 production in 2017 totalled 287,000 BOE, already surpassing the lower end of the 2018 guidance.

What is good about Continental is that it has made some savvy hedges (this time). After the company took off its hedges too early during the tumultuous years of 2014 and 2015, it has hedged 80% of anticipated gas production this year at nearly $2.90 mcf, while it has no oil hedges in place.

Fourth Quarter net production attains company record of nearly 170,000 BOEPD

Domestic net production was 169,800 BOEPD (40% oil and 61% liquids), exceeding mid-point guidance by approximately 1,750 BOEPD. The better than expected results during the quarter were primarily related to higher volumes from the Anadarko Basin, which reached more than 117,000 BOEPD (12% increase from the prior quarter).

For the full year, Anadarko Basin production grew 16% over the prior year and averaged nearly 100,000 BOEPD (34% oil and 62% liquids). Lease operating expenses (LOE) in the Anadarko Basin averaged $1.76 per BOE for the year, the lowest LOE within the Company’s portfolio.

Recent operational Oklahoma highlights:

The Company turned to sales its most “technically comprehensive” spacing pilot to-date — the Velta June — which has 12 wells (drilled on four separate pads) located in the Meramec formation. This 5,000′ lateral development reached combined peak production from the pads in excess of 10,000 BOEPD gross. Newfield operates the Velta June with a 48% working interest.

The information obtained from the Velta June development will be applied to the entirety of the STACK development with key learnings on completion cluster efficiencies, intra-well communication, well design cost/benefit analysis, fracture geometry and flowback practices.

Newfield has now completed nearly 80 infill wells in STACK and has tested from four to 12 wells per section in the Meramec horizon. The results have shown the ability to generate strong returns across the acreage from the Stark 10-well development located in the west, to the Jackson/Florene spacing test located to the east.

In 2017, Newfield allocated capital to test additional prospective horizons on its acreage in the AnadarkoBasin. This endeavor was dubbed “SCORE” — the Sycamore, Caney, Osage Resource Expansion. Since early 2017, Newfield has drilled or participated in approximately 20 SCORE wells. In addition to successful Newfield operated and industry wells in the Sycamore, Caney and Osage, Newfield recently extended the prolific STACK Meramec play to the northwest and the North SCOOP oil play was extended to the east.

One distinct highlight was the Larry well, completed in the black oil window along the eastern edge of Newfield’s North SCOOP play. This SXL well had a gross IP30 of more than 1,900 BOEPD, of which more than 80% was oil. Newfield remains highly encouraged by its North SCOOP development and plans significant HBP drilling activity in its three-year plan (3YR Plan).

Cabot plans 85 wells in Marcellus shale in 2018

Cabot Oil & Gas Corp., based in Houston, expects to average three rigs and two completion crews in the Marcellus shale during 2018, resulting in 85 net wells drilled and 95 net wells completed.

Cabot has about 179,000 net acres in the dry gas window of the Marcellus shale, primarily in Susquehanna County, Pa., with two rigs running. The average lateral length for the 2018 Marcellus shale drilling program is 8,300 ft and the expected average well cost is $8.3 million for drilling, completion, and facilities.

In December 2017, the company announced plans to sell both operated and non-operated Eagle Ford assets to Venado Oil & Gas LLC. Commenting on the deal, Cabot Chairman, Pres., and Chief Executive Officer Dan O. Dinges said the Eagle Ford assets were “a nice complement” to the company’s Marcellus shale position, providing capital allocation optionality in a higher priced oil environment, but that based on its oil market outlook and resulting rates of return compared to its Marcellus returns, there were no plans to allocate capital to assets beyond maintenance capital levels.

Texas 2017 oil output surged above 1 billion barrels

Texas produced a total of 1.03 billion barrels of oil in 2017, while December production was 2.52 million barrels per day on average, up 5% from December 2016, according to the Texas Railroad Commission. Meanwhile, analysts are concerned over the growing backlog of drilled but uncompleted wells, which more than doubled year-on-year and is up 4% between December and January, according to the Federal Reserve Bank of Dallas.

Rig counts, meanwhile, continue to climb, showing energy companies are willing to spend on exploration and production now that oil prices are holding steadily above $60 per barrel, compared with around $30 per barrel two years ago.

Divestment News

Laredo Petroleum Inc. is selling its operated and nonoperated working interests in 20 wells, plus associated leasehold acreage, all located in the Permian Basin in Glasscock County, Texas.

This is an auction property with bids ending on March 21 at 1:30 p.m. CT. For complete due diligence information, please visit energynet.com

Oklahoma-based WPX Energy sells northwest New Mexico assets

Tulsa, Oklahoma-based WPX Energy Inc. recently announced the sale of the last of its Four Corners assets for $700 million, the Daily Times of Farmington reports.

WPX sold some 150 oil wells on about 100,000 acres in Gallup to an undisclosed party in a transaction that is expected to close by the end of March, WPX spokesman Kelly Swan said.

Swan said WPX has been shifting its focus and funneling its resources to its operations in the Permian Basin of southeast New Mexico and west Texas and in the Williston Basin of North Dakota over the past few years.

STACK OFFERING

Red Bluff Resources Operating, LLC (“Red Bluff” or “RBR”) is offering for sale its oil & gas leasehold and related assets located in the Northeast STACK of Logan County, Oklahoma. The assets offer an attractive opportunity to acquire a well-delineated, high-returning, and drill-ready development plan from an industry-leading operator, including a meaningful base of existing production. Red Bluff has retained Detring Energy Advisors as its exclusive advisor relating to the transaction.

Process Overview:

Evaluation materials available via the Virtual Data Room (“VDR”) on Monday, February 12th

In 1908, Teddy Roosevelt appointed the National Conservation Commission to take a proper inventory of America’s natural resources and discover areas where egregious waste was occurring. When it delivered its findings to Congress in 1909, the commission reported that the nation’s petroleum supply would last just 25 or 30 years more. Of course, the nation’s oil supply didn’t dry up in 1939; engineers developed new ways to extract oil from what used to be thought of as waste material.

The June 1927 issue of Science and Invention magazine included a short article about a process developed in 1926 by two engineers named Clifford Bowie and M. Gavin at the U.S. Bureau of Mines. In 1927, the U.S was using about 750 million barrels of oil annually (compared with about 7 billion barrels annually today), with consumption in the Roaring Twenties showing no signs of slowing down. As the article notes, when an oil field in the 1920s was considered “dry,” only about 20 percent of the usable oil had been extracted from it. The remaining 80 percent was simply soaked up into the sands.

Oil prices moved lower Wednesday after the U.S. Energy Information Administration reported that domestic crude supplies rose by 3 million barrels for the week ended Feb. 23. Analysts surveyed by S&P Global Platts had forecast a climb of 2.1 million barrels, while the American Petroleum Institute on Tuesday reported a rise of 933,000 barrels. Gasoline stockpiles also rose by 2.5 million barrels for the week, while distillate stockpiles fell by 1 million barrels, according to the EIA.

April WTI crude CLJ8, fell 65 cents, to settle at $60.99 a barrel on the New York Mercantile Exchange, the lowest finish since Feb. 14.

The global crude benchmark, May Brent UK:LCOJ8 fell 90 cents, to $63.83 a barrel on the ICE Futures Europe exchange, its lowest finish since Feb. 13. Lead-month Brent fell about 4.7% in February, its first monthly loss since June.

NAT GAS NEWS

The EIA reported a -78 Bcf change in storage, bringing the total storage number to 1.682 Tcf. This compares to the -7 Bcf change last year and -118 Bcf change for the five-year average.

April natural gas NGJ18, closed Thursday at $2.698 per million British thermal units.

52WK RANGE
$2.487 – $3.010

Okla. unveils stricter fracking guidelines to prevent earthquakes

The Oklahoma Corporation Commission has published new hydraulic fracturing regulations that require oil and natural gas operators to use seismic arrays to monitor seismic activity and pause operations for six hours in the event of a magnitude 2.5 earthquake. “While more study needs to be done, the indications are that those operators who have their own seismic arrays and took actions when there were seismic events too small to be felt decreased the risk of having multiple, stronger earthquakes,” said Tim Baker, director of the commission’s Oil and Gas Conservation Division.

Marathon STACK Play Activity – Blaine County

Marathon recently filed several new multi-unit permits in Blaine County, all in a heavily drilled area on the border between 15N-11W and 16N-11W.

The initial Stack play-Meramec well #1-3-34MXH H.R. Potter 1511 in this unit, drilled by Marathon Oil Corp., produced 1.17 Mbbl of 49-degree-gravity oil, 2.45 MMcf of gas and 1.641 Mbbl of water per day. It was tested on a 28/64-in. choke with production from perforations between 10,730-20,730 ft following acidizing and fracturing. The Watonga-Chickasha Trend venture was drilled to the north to 20,903 ft, 10,728 ft true vertical, and bottomed in Section 34-16n-11w.

The well produced 0.225 Bcf of gas between its first production in January 2017 and October of 2017.

SandRidge Energy Cuts 80 Jobs

SandRidge Energy, Inc. has recently laid off 80 employees from Oklahoma City, OK office, which is around 30% of its workforce. Following the job cuts, the number staff in the office was reduced to 189 from 269.

During the end of 2017, activist investor Carl C. Icahn and other investors successfully stopped a $746-million acquisition of the Colorado-based Bonanza Creek Energy, Inc. by SandRidge and questioned the then CEO James Bennett’s actions. In the beginning of February, the company revised its leadership following Bennett’s departure. At present, Bill Griffin is serving as the interim president and CEO of SandRidge.

Friday Snippets

Energy Transfer may build new crude pipeline in Permian

Energy Transfer Partners is exploring opportunities to develop a new crude oil pipeline from the Permian Basin to Nederland, Texas, a company executive said, without providing additional details. ETP also announced that the first phase of its Permian Express 3 pipeline entered service in the fourth quarter of 2017.

Reclamation of wells on federal land to cost billions of dollars

The cost of plugging and cleaning up the 94,096 oil and natural gas wells on US public land could rise to $6.1 billion, with taxpayers likely to bear the brunt, according to an analysis by consultancy ECONorthwest. Oil and gas companies are currently required to pay reclamation bonds of $10,000 per well, while the average reclamation cost is $65,200.

IEA: US to replace Russia as world’s biggest oil producer

By 2019 and possibly sooner, the US will become the world’s top oil producer, taking the place of Russia, the International Energy Agency said. US oil production isn’t likely to reach its peak until 2020, said IEA Executive Director Fatih Birol.

Whiting posts smaller-than-forecast quarterly loss

US shale oil producer Whiting Petroleum reported a net loss of $798.3 million in the fourth quarter, which includes an $835 million impairment charge for the write-down of its Colorado assets. Excluding one-time charges, Whiting’s net loss was 17 cents per share, versus analyst expectations for a loss of 30 cents per share.

Well interaction has its benefits, expert says

Interactions between horizontal wells can help increase oil production as long as operators take the necessary steps to limit negative impacts, according to Ali Daneshy, adjunct professor of petroleum engineering at the University of Houston. The primary cause of well interaction is reservoir depletion, a problem that can be prevented using simultaneous fracturing or zipper fractures, Daneshy says.

Chevron can thank shale for best reserve replacement ratio in years

Chevron’s organic reserve replacement ratio was 161% last year, the strongest performance since at least 2013, which can be attributed to its US operations, particularly in the Permian Basin, writes Liam Denning. In the US, Chevron added nearly four barrels of oil to proved reserves for every one barrel produced.

Pa. gas production outpaces energy needs

As natural gas production in the Marcellus and Utica shale plays tripled over the past five years, Pennsylvania has ended up pumping more gas than its network of distribution companies and power plants needs. To ensure the sustainability of the region’s drilling boom, Pennsylvania requires investments in facilities such as power plants and cracker plants as well as new gas transportation infrastructure to facilitate the shipment of the extra natural gas supply to other markets.

First LNG from Cheniere’s terminal in Texas expected this year

Cheniere Energy’s export terminal in Corpus Christi, Texas, may begin producing liquefied natural gas this year, with the two 0.7-billion-cubic-feet-per-day units over 80% complete. “We will hopefully start producing first LNG by this year and have made significant progress on train 3 which … we are hoping to take a final investment decision on soon,” said Douglas Wharton, director origination for Asia at Cheniere Marketing in Singapore.

Step Energy Services acquires US frack company for $275M

Canada’s Step Energy Services has agreed to purchase Houston-based hydraulic fracturing provider Tucker Energy Services for $275 million. “The acquisition of Tucker provides Step with a launching pad into the U.S. fracturing market with established exposure to high-growth plays such as the SCOOP/STACK and Woodford (all in Oklahoma) and a loyal, high-quality client base,” Step President and CEO Regan Davis said.

February 23. 2018

EARNINGS UPDATE

CHESAPEAKE

Chesapeake Energy (NYSE:CHK) announced earnings results today that beat the street on earnings and revenues. The company earned an adjusted $314M or $.30 cents a share for the fourth quarter. That is a whopping 400% increase from last years results.

The company increased oil production by 15% YOY while reducing CAP Ex.

Chesapeake also beat by $200M on revenues as they clocked in around $2.5B against a whisper number of $2.3B.

CHK also says it expects new wells to be “a lot more economic” as it tests new well designs; as an example, CHK says the Haynesville Shale is “roaring back” as technological breakthroughs with longer laterals and improved completion designs have led the company to ~30% in production growth in the play since 2016.

Devon Energy

Estimates: EPS seen climbing 140% to 60 cents with revenue up 4.5% to $3.5 billion.

Results: EPS of 38 cents on revenue of $4 billion. Oil production was virtually flat at 246,000 barrels per day, while total production edged up 2% to 548,000 barrels of oil equivalent per day.

Outlook: Full-year upstream capital budget seen at $2.2 billion-$2.4 billion, which could be self-funded via cash flow even with U.S. oil at $50 a barrel. That’s up from the $2 billion spent on exploration and production in 2017.

Continental Resources

Estimates: Seen swinging back to a profit of 32 cents per share from a loss of 7 cents per share in the year ago quarter. Revenue see rising 73% to $951 million.

Results: EPS of 41 cents on revenue of $1.05 billion. Net production rose 37% to 286,985 barrels of oil equivalent per day. Bakken net production jumped 58% to an all-time high of 165,598 BOE per day. STACK net production surged 96% to 47,914 BOE per day. SCOOP net production dipped 2% to 62,242 BOE per day.

Outlook: Full-year production of 285,000-300,000 BOE per day, up from 242,637 BOE a day in 2017, and non-acquisition capital expenditures of $2.3 billion.

Parsley Energy

Estimates: EPS seen soaring 200% to 18 cents with revenue up 91% to $298 million.

Results: EPS of 20 cents and adjusted EPS of 30 cents on revenue of $311.5 million. Net production averaged 80,300 barrels of oil equivalent per day, up 78%.

Outlook: Full-year net production of 98,000-108,000 BOE per day, up from 67,923 in 2017. Capital expenditures of $1.35 billion-$1.55 billion.

“Following a transformative 2017 for Parsley Energy, we are eager to efficiently harvest the ample resource base our team has assembled, tested, and optimized,” said Chairman and CEO Bryan Sheffield in a statement. “Even at a steady activity pace, we look forward to delivering compelling high-margin growth on a simplified 2018 development program.”

Results: EPS of 66 cents on revenue of $780 million. Average daily crude production grew 30% to 130,000 barrels per day.

Outlook: Full-year crude oil production growth of 20% and total production growth of 16%-20%, with capital spending seen at $1.9 billion-$2.1 billion, up from $1.7 billion in 2017. The company will spend 65% of its capex in the Delaware basin, 30% in the Midland basin and 5% in the New Mexico Shelf.

EQT, the biggest US natural gas producer, is spinning off its pipeline business

– EQT, the largest U.S. natural gas producer, will spin off its pipeline business into a separate, publicly traded company.

– The deal follows EQT’s purchase of Rice Energy last year and will merge the two companies’ midstream businesses.

– The announcement is something of a consolation prize to some investors who opposed EQT’s purchase of Rice and instead advocated for a spinoff of EQT’s midstream business.

EQT, the nation’s biggest natural gas producer, will spin off its pipeline business into a new publicly traded company, the Pittsburgh-based driller announced Wednesday.

The transaction represents something of a consolation prize to investors who objected to EQT’s purchase of Rice Energy last year. Opponents led by activist investor Barry Rosenstein’s Jana Partners had contended that splitting EQT’s natural gas production and transportation businesses would better reward EQT shareholders.

The spinoff will create the third-largest U.S. natural gas gathering company, according to EQT. The company says the deal will allow the two pure-play companies to attract an investor base attuned to their businesses, simplify financial results and more efficiently allocate capital.

Before their combination, both EQT and Rice operated midstream businesses — which transport oil and gas from wells to processing, transportation and shipping facilities — through limited partnerships.

The deal announced Wednesday will merge Rice Midstream Partners with EQT Midstream Partners, both of which are focused on the Appalachian region, the epicenter of the U.S. shale gas boom.

The new company will be led by the president of EQT’s midstream business, Jerry Ashcroft, who has more than 15 years of experience in the oil and gas industry, according to EQT. He was previously CEO of oil and gas infrastructure company Gulf Oil.

Credit: Tom DiChristopher | CNBC News | February 21, 2018

CHAPARRAL – Recent STACK Well Results

Operational Update

Chaparral operated two drilling rigs during the fourth quarter of 2017, one of which was dedicated to its joint venture operations. The company added a third rig during the first quarter of 2018 that will be drilling Chaparral and joint venture wells throughout the year.

From mid-September of 2017 through early first quarter 2018, initial production rates from Chaparral’s operated and non-operated D&C program exceeded type curve expectations. The following table provides a representative snapshot of STACK well results in the Meramec and Osage formations in Kingfisher, Canadian and Garfield counties.

(1) Table includes non-operated wells with greater than 20 percent working interest.
(2) Wells in Chaparral’s joint venture, in which Chaparral retains 15 percent of the joint venture’s working interest.
(3) The Fuksa 2007 #1LMH-14 Garfield Osage well reported first production on January 30, 2018. The initial production rate shown is based on 20 days of production.

Divestment News

US-based oil and gas company Braxton Minerals III plans to divest its royalty interests and non-participating royalty interests in 102 producing wells and one non-producing well located in West Virginia and Pennsylvania, US.

Located in the Doddridge, Marshall, Ritchie, Tyler and Wetzel counties of West Virginia, and Greene County in Pennsylvania, the interests cover an area of 559 mineral acres.
Antero Resources is the operator of the wells.

Merit Energy plans to divest its oil and gas properties located in Oklahoma, US.
The US-based oil and gas company plans to exit from the Oklahoma region following the completion of the deal.

Tenoaks Energy Advisors have been appointed to handle the divestment.

Concho Resources has divested 40,000 acres of its non-core leasehold acreage located in Ward and Reeves counties in Texas, US, for $280m.

The leasehold covers approximately 40,000 gross (20,000 net) acres. These assets were primarily non-operated with low working interest and not conducive to long-lateral development. Proved reserves and net production associated with these assets was minimal.

Factoid: Members of the Organization of the Petroleum Exporting Countries (OPEC) produce about 44.1% of the world’s crude oil, and possess almost 81.5% of the world’s total proven crude oil reserves, according to OPEC and US Energy Information Administration data.

The United States leads the world in total petroleum production, ahead of Saudi Arabia and Russia as reported in 2017.

U.S. crude oil production reached 10.038 million barrels per day (b/d) in November 2017, according to EIA’s latest Petroleum Supply Monthly. November’s production is the first time since 1970 that monthly U.S. production levels surpassed 10 million b/d and the second-highest U.S. monthly oil production value ever, just below the November 1970 production value of 10.044 million b/d.

EIA & API REPORT SUMMARY

U.S. crude oil stockpiles fell unexpectedly last week as net imports dropped to a record low due to a surge in exports, while inventories at the key storage hub in Cushing, Oklahoma continued to slide, the Energy Information Administration (EIA) said on Thursday.

Crude inventories fell 1.6 million barrels in the week to Feb. 16, compared with analysts’ expectations for an increase of 1.8 million barrels.

Net crude imports fell last week by 1.6 million barrels per day to 4.98 million bpd, the lowest level since the EIA started recording the data in 2001.

Exports of U.S. crude jumped to just above 2 million bpd, close to a record high of 2.1 million hit in October. That helped to push net imports to the lowest level on record.

Surprise Crude Encourages Oil Market

The American Petroleum Institute (API) reported a small draw of 907,000 barrels of United States crude oil inventories for the week ending February 16, according to the API data. Analysts had expected a small build of 1.333 million barrels in crude oil inventories, instead.

Last week, the American Petroleum Institute (API) reported a build of 3.947 million barrels of crude oil, along with a build in gasoline inventories of 4.634 million barrels.

This week’s data is more optimistic, with the API reporting not only a surprise draw for crude oil, but a modest gasoline build of 1.468 million barrels, which was largely in line with analyst forecasts that had the build pegged at a 1.229-million-barrel build.

Inventories at the Cushing, Oklahoma, site decreased by 2.644 million barrels this week.

The EIA announced an estimated 124 Bcf draw from storage for the week that ended February 16, compared with the 119 Bcf draw expected by a consensus of analysts surveyed by S&P Global Platts, although it is 14.5% below the 145 Bcf withdrawal averaged over the past five years.

The withdrawal puts the deficit to the five-year average at an estimated 19%, according to EIA data.

The market has appeared to be unconcerned with storage changes of late, as the winter season is quickly coming to an end and players expect robust production to continue in the shoulder and summer months.

March natural gas NGH18, closed Thursday at $2.634 per million British thermal units.

Under new CEO Bill Griffin and heightened attention from activist shareholders, SandRidge Energy Inc. executives are moving forward with a newly defined strategy while continuing to evaluate other options, executives said Thursday.

During a conference call with analysts Thursday morning, Griffin and other SandRidge executives said they are continuing to focus on cutting costs and enhancing drilling in the company’s two main producing areas — northwest Oklahoma’s NW STACK and Colorado’s North Park Basin.

Griffin said SandRidge executives and directors continue to evaluate a merger plan proposed by Tulsa-based Midstates Petroleum Co. SandRidge directors fired CEO James Bennett earlier this month, two days after Midstates publicly announced its proposal to merge with SandRidge. Under terms of the deal, Midstates CEO David Sambrooks would lead the combined company.

“We have been in conversation with Midstates management and have initiated our evaluation with support from our financial and legal advisers,” Griffin said Thursday. “Other than that, it is too early to provide comment on the proposal or our evaluation timeline.”

Shell Shows Interest in BHP Assets

Royal Dutch Shell Plc said it’s potentially interested in BHP Billiton Ltd.’s oil assets on sale in the Permian basin in the U.S. as it seeks to boost its role in shale.

The Anglo-Dutch company entered the prolific oil region in 2012 and plans to expand its position and generate positive cash flow next year, Andy Brown, Shell’s upstream director, said in an interview on Tuesday. The Permian offers production costs as low as $15 a barrel and is the driving force behind the current surge in U.S. output.

Shell “will look at opportunities to bulk up our shale position,” Brown said at the International Petroleum Week conference in London. BHP has good assets that “overlap our own acreage in the Permian,” and “may be interesting for us.” He didn’t say if the companies are currently talking.

BHP is accelerating plans to exit its $10 billion U.S. shale unit and said deals could be announced before the end of the year. BHP is prepared to offer the assets in as many as seven packages, including three in the prized Permian Basin, people with knowledge of the producer’s plans said this month. It expects initial bids for assets including the Fayetteville field in the June quarter, according to a statement Tuesday.

Friday Snippets

Colo. oil production gains momentum

Drillers in Colorado’s Niobrara region are expected to pump a record of 579,000 barrels of oil per day in March, encouraged by higher oil prices, according to the Energy Information Administration. Oil output from the Niobrara is seen climbing even further as drillers step up well completions, with the number of uncompleted wells down to 553, the lowest level since November 2014.

Occidental sees strong production gains in Permian Basin

More efficient drilling and productivity gains helped Occidental Petroleum boost Permian Basin production by nearly 15% in the fourth quarter over the third quarter, but despite this, pretax income for oil and natural gas fell from $220 million to $44 million.

US oil producers step up stock buyback programs

A stronger price environment has prompted the likes of Pioneer Natural Resources and Anadarko Petroleum to ramp up share buybacks, marking a turnaround from the past three years when oil and natural gas producers sold more than $60 billion worth of new stock. Shares of some producers are down to multiyear lows, making it the right time for companies to buy back their stock.

More frequent frack hits undermine Permian Basin production

As producers in the Permian Basin accelerate infill drilling and use more hydraulic fracturing stages, the risk of well interference or “frack hits” becomes more serious every day due to tighter well spacing. Frack hits can cause mechanical, physical or chemical damage to wells which can result in declining production, according to Apache engineering adviser George King, who encourages operators to share information with each other to prevent these problems.

Chesapeake seeks to diversify its portfolio

Chesapeake Energy is planning to acquire additional oil assets as it looks to diversify its natural gas-dominated portfolio. The company has oil-producing properties in the Eagle Ford Shale, Powder River Basin and the Midcontinent, with an output of 100,000 barrels per day in the fourth quarter.

OPEC’s market rebalancing efforts bolstering US shale exports

OPEC’s production cut agreement is helping the US become an export powerhouse because it gives shale exporters the opportunity to gain more market share and expand their global footprint, according to Morningstar Director of Research Commodities and Energy Sandy Fielden. Total US crude oil exports jumped to an average of 1.3 million barrels per day in the week ending Feb. 9, with West Texas Intermediate’s discount to Brent serving as another driver of foreign demand for US crude.

Deepwater, shale both at the center of Shell’s growth strategy

Royal Dutch Shell’s growth strategy for the next few years gives equal importance to deepwater and US shale, with the company aiming to increase offshore production while it strives to achieve a positive cash flow from shale operations by 2019, said Upstream Director Andy Brown. “We can see strong (shale) production growth, strong cash surpluses that gives us a balance in our portfolio where you can ramp investment up and down, you can moderate that, very unlike deepwater which is quite chunky,” Brown said.

BP sees oil demand peaking within 2 decades

The wider adoption of renewable energy and electric vehicles could cause oil demand to peak at around 110.3 million barrels per day before 2040, according to BP’s annual energy outlook. BP also said it expects oil consumption to grow by 0.14% per year between 2016 and 2040.

Shale boom changed the effect of oil prices on US economy

Before the oil downturn, higher oil prices would cause the US economy to slow down, but as the second shale boom turned the US into a major oil producer and soon-to-be net exporter of energy, the trend is showing signs of reversal. These days, the US economy is growing in tandem with oil prices as the increase in energy investment, production and jobs helps offset the harmful effects higher oil prices have on consumers.

Energy Transfer’s profit skyrockets on US tax overhaul

Pipeline operator Energy Transfer Partners saw its earnings jump more than fourfold last year to $2.5 billion, boosted by the recent tax bill and the approval of the Dakota Access Pipeline. ETP reported a profit of 57 cents per share in the fourth quarter, beating the highest analyst estimate of 49 cents per share.

PetroQuest finishes wells in East Texas, plans horizontal project

Louisiana-based PetroQuest has finished drilling two wells in East Texas and is planning a horizontal drilling program at the site this year. One well had a lateral length of 1,905 meters and the other a lateral length of 1,640 meters.

February 16. 2018

Linn Energy selling West Texas assets for $120 million

Houston’s Linn Energy it’s selling its West Texas assets for nearly $120 million so the formerly bankrupted enterprise can focus on its oil and gas developments in Oklahoma.

Linn said it is unloaded about 28,000 acres in mature West Texas oil fields to an undisclosed buyer for $119.5 million.

Annualized field level cash flow on the properties is about $32 million, Linn said. The company will save an estimated $3 million annually on related general and administrative expenses after the sale closes.

Linn’s divestitures are part of a plan to further separate into three companies this year, including Roan Resources LLC, which will operate as a pure-play in the Merge, Scoop and Stack. Linn also has a 105,000 net-acre position in the northwest Stack.

Southwestern Energy to sell Fayetteville Shale assets in Arkansas

Southwestern Energy recently announced it plans to put its legacy Fayetteville Shale assets in Arkansas up for sale. Upstream and midstream assets there could fetch proceeds of $2 billion, one analyst said.

The Houston-based producer will “actively pursue strategic alternatives” for its exploration-and-production and the midstream gathering assets in the play, which marked its first entry into the North American unconventional shales. Southwestern would use proceeds from the divestiture of the Fayetteville assets to reduce debt, supplement Appalachia development capital and potentially to return capital to shareholders, the company said in a statement.

The company’s plans to divest its Fayetteville assets is part of “a series of strategic actions that began in early 2016 to reposition our company to compete and win in the future,” President and CEO Bill Way said in the statement.

Way described the Fayetteville holdings as “a large-scale, low-decline, cash flow generating asset with identified, low-risk future development opportunities.”

Southwestern was among the first E&P companies to begin development in the play, entering the Fayetteville in the early years of the 21st century. However in recent years, the Fayetteville has taken a back seat to the company’s development of its Appalachian Basin assets northeastern Pennsylvania and in West Virginia.

Valiant Midstream to Build Natural Gas Gathering System and Processing Plant in Oklahoma’s Arkoma Stack Play

OKC based Valiant Midstream LLC announced Feb. 7 it has commenced construction on a natural gas gathering system and cryogenic gas processing plant in the heart of the Arkoma Stack play in southeast Oklahoma. The system is expected to come online in multiple phases starting in the second quarter of 2018. It will benefit from long-term dedications of two prominent acreage holders in the region.

The initial phase of the project will include the installation of a 200 MMCFD cryogenic processing plant and a high-pressure trunk line spanning through the basin’s liquids-rich fairway with a gathering system consisting of 12-inch to 24-inch steel pipeline, five gas compression facilities and condensate stabilization. The processing plant will provide access to multiple residue gas pipelines and will offer Valiant’s customers market flexibility, enhanced netbacks and assurance of flow. Valiant expects an initial investment of $200 million to the Arkoma Stack and to increase its investment as producers’ needs develop across the basin.

Valiant will provide gathering and processing services for anchor customers Corterra Energy LLC and Canyon Creek Energy – Arkoma LLC under long-term contracts. Combined, these companies have committed over 1.8 million gross acres within an area of mutual interest to the midstream project. Corterra and Canyon Creek currently control close to 500,000 gross acres across the re-emerging Arkoma Stack play.
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“Canyon Creek and Corterra’s positions blanket a large portion of the liquids-rich window of the Arkoma Stack,” Webster said. “Both producers are clear basin leaders which hold premier acreage positions and have the right management teams and capital partners to execute their development strategies.”

Cardinal Midstream developing the Iron Horse system

Cardinal Midstream III, with $250 million in financial backing from investor EnCap Flatrock Midstream, on Wednesday announced it’s developing the Iron Horse, a natural gas gathering/processing system to serve producers working in Oklahoma’s SCOOP/STACK/Merge play.

Located in the Anadarko Basin, the liquids-rich play targets multiple benches within the Woodford and Mississippian pay zones, with upside from additional horizons, Kallanish Energy reports.
Construction of the gathering system is underway, and Dallas-based Cardinal expects to commission the system’s first natural gas processing plant in the third quarter of 2018.

The project is anchored by a long-term acreage dedication from independent producer Travis Peak Resources.

“The team at Cardinal has decades of proven midstream experience, a deep understanding of producer needs and a strong track record of rapid, reliable execution,” said Travis Peak president and CEO Jim Addison.

Cardinal’s Iron Horse System will span Oklahoma’s Canadian, Grady, Caddo and McClain counties. The first phase of the system will consist of more than 100 miles of high- and low-pressure gathering pipeline, multiple compressor stations and the Iron Horse cryogenic gas processing plant, with the capacity to process 200 million cubic feet per day (MMcf/d) of gas.

Located in Grady County, the Iron Horse Plant site is designed to accommodate additional expansions that would triple processing capacity to 600 MMcf/d.

“Our predecessor company, Cardinal I, began working in Oklahoma in 2010, so this is a homecoming for us. The drilling results and production growth in the SCOOP/STACK/Merge are very exciting. We are seeing more producers move additional rigs into this prolific area because of its compelling economics and improving results,” said Cardinal chairman and CEO Doug Dormer.

Cardinal III is the third company the Cardinal management team has formed in partnership with EnCap Flatrock Midstream.

Factoid: Oil Shale

Oil shale is an organic-rich fine-grained sedimentary rock containing kerogen (a solid mixture of organic chemical compounds) from which liquid hydrocarbons, called shale oil (not to be confused with tight oil—crude oil occurring naturally in shales), can be produced. Shale oil is a substitute for conventional crude oil; however, extracting shale oil from oil shale is more costly than the production of conventional crude oil both financially and in terms of its environmental impact. Deposits of oil shale occur around the world, including major deposits in the United States. A 2016 estimate of global deposits set the total world resources of oil shale equivalent of 6.05 trillion barrels of oil in place. Oil shale deposits exist in 37 countries globally.

Occidental sees strong production gains in Permian Basin

More efficient drilling and productivity gains helped Occidental Petroleum boost Permian Basin production by nearly 15% in the fourth quarter over the third quarter, but despite this, pretax income for oil and natural gas fell from $220 million to $44 million. Net income was $497 million, compared with a net loss of $272 million.

“All of our segments generated significant free cash flow, and we achieved record-breaking well results in our Permian resources business,” President and Chief Executive Officer Vicki Hollub said in a statement.

In analysis of U.S. shale oil and gas production gains, Simon Flowers, the chief analyst at consultant group Wood Mackenzie, said the “stars seem aligned” for output in the Lower 48, as improved efficiency and market conditions are helping to establish the United States as the world’s leading producer.

U.S. shale oil and gas operators like Occidental are expected to generate positive cash flow this year, two years earlier than Wood Mackenzie expected. Shale has been more resilient to historically low crude oil prices than expected, but Flowers said discipline will be tested as the market recovers.

Continental Resources unveils $2.3B capex plan for 2018

Oklahoma City based Continental Resources issued preliminary 2017 production results and a $2.3B capital spending plan for 2018.

CLR expects Q4 production of nearly 287K boe/day, up 37% Y/Y, and full-year production of ~242K boe/day, up 12% vs. 2016, and forecasts 2018 production growth of 17%-24% to 285K-300K, with a 2018 exit rate of 305K-315K boe/day.

CLR forecasts $3B-$3.2B of cash flow from operations in 2018 and $800M-$900M of free cash flow at $60/bbl WTI and $3/Mcf Henry Hub.

Of the 2018 $2.3B planned capex, CLR allocates $2B to drilling and completion activities, with 78% of the D&C budget focusing on the oil-weighted Bakken and SCOOP Springer assets.

Continental is expected to use six rigs to drill 142 wells in North Dakota’s Bakken Shale and 15 rigs to drill 118 wells in Oklahoma’s SCOOP and STACK fields in 2018.

EIA REPORT SUMMARY

EIA reports smaller-than-expected build in US crude stockpiles

US crude inventories climbed by 1.8 million barrels last week, versus analyst expectations for a 2.6-million-barrel increase, while gasoline stocks rose by 3.6 million barrels and distillate supplies dropped by 500,000 barrels, according to the Energy Information Administration. Weekly crude production grew by 20,000 barrels per day to a new record of 10.27 million barrels per day, the EIA said.

Oil prices saw the much-needed correction recently as markets finally took note of rising US production. WTI prices declined almost 10 per cent and Brent nearly 8 per cent as US production notched a record 10.25 mbpd last week.

The current selloff has also established the fact that $65 for WTI and $70 for Brent remains a strong cap.

The premium of Brent over WTI dropped to nearly the lowest in six months in volatile and mixed oil trade on Thursday, in which a weaker dollar and a Saudi pledge to more than overcomply with the production cuts supported prices, while concerns of oversupply from U.S. shale and increased U.S. inventories dragged prices down.

“Persistently high oil production in the United States, the country’s gasoline stocks at their highest level since March 2017, and a shrinking price premium of Brent over WTI crude portrays a bearish picture for oil prices,” Abhishek Kumar, Senior Energy Analyst at Interfax Energy’s Global Gas Analytics, said in a report by Reuters.

West Texas Intermediate crude (CLH18 March Contract) climbed 74 cents Thursday to close up at $61.34.

International benchmark Brent crude (QAJ18 April Contract) was down 3 cents Thursday to $64.33 a barrel.

NAT GAS NEWS

Futures up-ticked a little on Thursday, following a U.S. Energy Information Administration report that showed a higher-than-expected storage withdrawal.

The EIA announced an estimated 194 Bcf draw from storage for the wee-ended February 9, above the 183 Bcf draw expected by a consensus of analysts, and well above the 154 Bcf withdrawal average over the past five years.

The withdrawal brought the national stock deficit to the five-year average to an estimated 18.7%, according to the EIA data.

March natural gas NGH18, closed Thursday at $2.580 per million British thermal units.

52WK RANGE
$2.532 – $3.607

Texas drilling permits, completions rise as crude prices firm

Texas oil and gas producers received 1,166 drilling permits last month, a 21 percent increase over year-ago levels, the state energy regulator said last week, after filings surged on the back of higher crude prices.

Nearly half of January’s permits were issued for the Midland area of West Texas, home to the Permian Basin oilfield. Shale producers have flocked to the Permian because of its prolific resources and relatively cheap production cost.

Well completions rose by 79 percent from a year ago to 963, the Railroad Commission of Texas said. The spike in completions, the final step before production can begin, comes as producers are working through a growing backlog of drilled-but-uncompleted wells, known as DUCs.

Although the rate of well completions in Texas is on the rise, the number of DUCs in the state also continued to climb, an indication that producers are still drilling wells faster than they can be completed.

As of December, there were some 2,777 DUCs in the Permian Basin, up 137 from the prior month and a 119 percent increase from a year ago. In total, there were 7,493 DUCs in the United States, up 37 percent in a year, according to data from the U.S. Energy Information Administration.

– The pre-tax SEC-priced present value of future cash flows of the total proved reserves discounted at 10% (“PV-10”) (a non-GAAP financial measure defined at the end of this release) increased 103% to $288.4 million compared to 2016.

– In 2017, excluding acquisitions and divestitures, we replaced approximately 835% of our 2017 preliminary annual production of approximately 2.3 MMBoe.

– Fourth quarter 2017 preliminary production averaged approximately 6.9 thousand barrels of oil equivalent per day (“MBoe/d”) and consisted of 72% liquids.

J. Russell Porter, Gastar’s President and CEO, commented, “Our strong growth in proved reserves is directly attributable to our continued successful drilling program designed to de-risk and delineate the Meramec and Osage formations on our STACK Play acreage. Excluding WEHLU, our STACK Play reserves increased 184% year-over-year. Of the 17.4 MMBoe year-over-year increase in our proved reserves, approximately 94% resulted from additions attributable to our drilling success.”

“During the second half of 2017, we made significant strides at optimizing our drilling and completion techniques. As a result, we were able to book initial proved undeveloped reserves associated with the Osage formation. Our Osage type curve, assuming a 4,950 foot lateral length on a three-stream basis, is 500 thousand barrels of oil equivalent (“MBoe”), 73% liquids, and yields a strong internal rate of return.”

“With the sale of our WEHLU assets scheduled to close at the end of February, we should have ample liquidity to execute our 2018 capital program,” added Porter.

Closing Thought: Help me to expect the best in others, and also help me to endure the worst when it happens.

Have a great weekend from Oklahoma Minerals!

Talk soon,
Gib Knight

Friday Snippets

Pipeline operators could see revenues fall due to US tax overhaul

The new US tax law means pipeline operators may have to cut shipping rates by as much as 10% in some cases, resulting in hundreds of millions of dollars in lost revenue, according to a Wall Street Journal analysis. Dominion Energy, TransCanada and Williams Cos. could be among the hardest hit companies, while operators with more negotiated rates such as Enbridge, Kinder Morgan and Energy Transfer Equity would be less affected.

Competition between oilfield services giants reaches whole new level

The battle for market share between the world’s biggest oilfield services companies is escalating with Halliburton’s recent attempt to convince the US Patent and Trademark Office to revoke some of rival Schlumberger’s hydraulic fracturing-related patents. The Patent Trial and Appeal Board is reviewing six Schlumberger patents after Halliburton argued the patents are “a classic situation where known elements are combined according to known methods to yield predictable results.”

US shale patches hum with activity

Recent figures show US shale fields beyond the Permian Basin are experiencing a revival, with the January land rig count up 4% from December and 40% higher than in January 2017, according to S&P Global Platts. “[W]e are now starting to see some dispersion in permits that points towards future growth being led from other regions in the months ahead,” Platts senior industry analyst Trey Cowan said.

$1.8B Offer Deepens Fight Over Breitburn Ch. 11 Plan

The judge presiding over the Chapter 11 case for Breitburn Energy Partners LP said Tuesday he would admit into evidence a recent unsolicited $1.8 billion bid for the oil and gas enterprise, raising questions if the move actually reshapes a fight over the company’s estimated valuation and pending restructuring plan.

EnCap Flatrock invests $400M in Lotus Midstream

Sugar Land, Texas-based Lotus Midstream has secured a $400 million commitment from investment fund EnCap Flatrock Midstream to help it develop a network of crude oil pipelines across the Permian Basin. Lotus was launched in January by former executives from Sunoco Logistics, including Mike Prince, who serves as CEO of the new company.

US crude production could rise faster than demand, IEA says

Shale drillers are pumping oil so quickly US crude production growth could outpace global demand growth in 2018, jeopardizing the market rebalancing, according to the International Energy Agency. US oil production in January climbed by 1.3 million barrels per day from the same month last year, the IEA said.

Colo. adopts tougher rules for oil, gas pipelines

The Colorado Oil and Gas Conservation Commission on Tuesday voted unanimously to approve stricter rules for installing, testing and shutting down oil and natural gas flow lines to prevent incidents such as April’s fatal explosion in the town of Firestone. Under the new rules, companies must also provide regulators with the locations of some pipelines.

US exports to Mexico slow down amid low inventories, lack of pipelines

US natural gas exports to Mexico are on a downward trajectory, under pressure from declining US gas inventories and a shortage of pipeline capacity, according to analysts. The US exported an average of 3.93 billion cubic feet per day over the past 30 days, down from 4.03 billion cubic feet per day during the same period last year.

WildHorse Resource Development has reached an agreement to sell its Over-Pressured Cotton Valley assets in North Louisiana to an unnamed buyer for $217 million as part of the company’s shift to a pure-play Eagle Ford Shale producer. Additionally, WildHorse recently acquired producing and non-producing properties in Lee County, Texas, for $19.3 million.

February 9, 2018

Despite focus on returns, production growth still on the mind of shale drillers

US shale drillers’ renewed focus on profitability and returns does not mean firms have completely given up on production growth ambitions, according to Trisha Curtis, co-founder and president of energy analytics and advisory firm PetroNerds. Curtis predicts that most shale firms will achieve positive cash flows no earlier than mid-2018 and perhaps even later than that.

SandRidge Energy ousts CEO, CFO

SandRidge Energy Inc. said Thursday that Chief Executive James Bennett and Chief Financial Officer Julian Bott will leave the company as part of a shakeup amid investor pressure.

The announcement comes a day after the oil-and-gas producer said it was reviewing an unsolicited merger bid from Midstates Petroleum Company.

James Bennett led SandRidge into and out of bankruptcy in 2016 as its CEO and a board member, and drew Icahn’s ire over his compensation and a $746 million bid to buy rival Bonanza Creek Energy Inc late last year. SandRidge terminated the offer in December.

Warburg Pincus launches new energy company in the Permian

New York private equity firm Warburg Pincus said Monday it’s funding the launch of a new Texas energy company focused on exploration and production in the booming Permian Basin.

The new Midland-based Ridge Runner Resources receives a $300 million boost from Warburg Pincus, which recently opened a new Houston office, to focus on new shale developments in the Permian’s emerging Delaware Basin.

Ridge Runner is led by new CEO Scott Germann, an Exxon Mobil-trained geologist who’s spent years working in the Permian. Germann most recently led another private equity-backed Midland player, BC Operating, which sold most of its assets last year to Houston’s Marathon Oil for more than $1 billion.

Oil and gas developer and producer Ascent Resources Marcellus Holdings LLC and two subsidiaries filed for Chapter 11 protection Tuesday in Delaware with a restructuring strategy in hand to quickly swap out $1.2 billion in first- and second-lien debt for equity in a reorganized company mid-March.

Privately held and Oklahoma City based Ascent is one of several energy companies McClendon launched after he was ousted in 2013 during a corporate governance crisis from Chesapeake Energy Corp, which he had founded and built into one of the largest U.S. shale drillers.

The filing in the U.S. Bankruptcy Court in Wilmington, Delaware, is for Ascent’s Marcellus formations, which own development rights on some 43,000 acres in West Virginia, and has no impact on its Utica play in Ohio, the company said in a news release.

Factoid: Ohio FACTS AND STATISTICS

Ohio is ranked fourth in the total number of wells drilled. Ohio has drilled over 275,000 wells to date, followed only by Texas, Oklahoma and Pennsylvania. Ohio currently has over 50,000 natural gas and crude oil wells producing in 49 of Ohio’s 88 counties. Ohio drilled 620 wells in 2016.

The oil and gas industry paid over $200 million in royalties and provided more than $84 million in free gas in 2016 to local landowners (mineral interest owners) including farmers, businesses, schools, churches and local governments with wells on their property.

Midstates Petroleum offers merger with rival SandRidge Energy

Midstates Petroleum Co. has proposed a merger with Oklahoma City-based SandRidge Energy, it announced Tuesday.

Midstates, a Tulsa-based exploration and production company, sent a letter to the SandRidge Board of Directors detailing a proposed merger.

The all-stock merger would create the largest producer in the Mississippian Lime formation, according to a news release.

“We are ready to move forward immediately to negotiate a merger agreement to form a stronger, more formidable company,” Midstates President and CEO David J. Sambrooks said in a statement. “The combined company will have zero net debt, strong liquidity, and forecasted free cash flow generation of up to $480 million over the next five years.”

The combined company would control more than 450,000 net acres in the core of the Mississippian Lime play and produce more than 53,000 barrels of oil equivalent per day. It would also own 75,000 net acres in the Northwest STACK play.

SandRidge abandoned the $746-million pursuit in December following opposition from investors including top shareholder, Carl Icahn.

Chesapeake Energy to sell Oklahoma assets for $500 million

Chesapeake Energy Corp. has reached three separate deals to sell wells and leases in Oklahoma for a total of $500 million, the company said Tuesday.

The sales include Chesapeake’s remaining producing properties and acreage in northwest Oklahoma’s Mississippi Lime, as well as properties in central and western Oklahoma, the company said. The sales include 238,000 net acres and 3,000 wells producing about 23,000 barrels of oil equivalent net to Chesapeake.

One transaction closed in January, and the other two are scheduled to be complete by the end of March.

Chesapeake executives said they plan to use the proceeds from both the stock and asset sales to reduce debt.

Credit: Adam Wilmoth | NewsOk.com | February 7, 2018

EIA REPORT SUMMARY

The Energy Information Administration shook the oil markets with the report of a build of 1.9 million barrels in U.S. crude oil inventories for the week to February 2. The report comes a day after the release of the latest Short-Term Energy Outlook that saw the EIA projecting local oil production will hit the 11-million-bpd mark late this year, with the average for the year seen at 10.6 million bpd.

The increase in production – framed by a recent rebound in drilling rig activity – comes after futures prices extended to three-year highs earlier this month, boosting sentiment among drillers.

The inventory report by the EIA is once again in conflict with numbers from the American Petroleum Institute, which surprised analysts with a 1.05-million-barrel decline, versus expectations for 3.19 million barrels more. Analysts expected the EIA to report a decline of 480,000 barrels. During the first month of the year, the EIA reported a total draw of 6.1 million barrels, with three weeks of draws since January 1, and one week of a build.

Meanwhile, stocks at the Cushing terminal in Oklahoma – the key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange – was down by 711,000 barrels to three-year lows of 36.3 million barrels.

Gasoline stockpiles continued to increase last week, the EIA also said. The build was a hefty 3.4 million barrels, following three weekly builds since the start of 2018 and one weekly draw, of 2 million barrels, reported last week.

U.S. crude prices fell as low as $60.27 on Thursday, wiping out all of the year’s gains. The fresh decline came after five days of losses and coincided with a 1,000-point plunge for the Dow Jones industrial average.

Commodities have been swept up in market volatility, but crude is also under pressure from rising U.S. output and stockpiles and a strengthening dollar.

West Texas Intermediate crude (CLH18 March Contract) fell 64 cents Thursday to close down at $61.15. The contract is down $4.65 since the close last Thursday.

International benchmark Brent crude (QAJ18 April Contract) was down 70 cents Thursday to $64.81 a barrel.

NAT GAS NEWS

The U.S. Energy Information Administration reported Thursday that domestic supplies of natural gas fell by 119 billion cubic feet for the week ended Feb. 2. Analysts had forecast a decrease of 109 billion, while the five-year average withdrawal is 151 billion. Total stocks now stand at 2.078 trillion cubic feet, down 503 billion cubic feet from a year ago, and 393 billion below the five-year average, the government said.

March natural gas NGH18, closed Thursday at $2.697 per million British thermal units.

52WK RANGE
$2.532 – $3.607

Pioneer Unloads Assets to Focus on Permian Basin

Another energy company is wiping its hands of its assets and properties in west Texas and the Panhandle and focusing solely on the Permian Basin.

Pioneer Natural Resources Company, an independent based in Dallas announced the divestiture plans. Up for sale are 70,000 net acres in the Eagle Ford Shale of South Texas. Those assets represent all of Pioneer’s 46% working interest in the play including its producing wells. Net production from those wells averaged nearly 27,000 barrels oil equivalent a day in the 4th quarter 2017.

Pioneer says it’s also separately divesting its acreage in the Sinor Nest Wilcox field. The Raton assets represent all of Pioneer’s interests in the field located in southeastern Colorado and northern New Mexico. Net production from the Raton averaged nearly 86 million cubic feet of gas a day in the last quarter of 2017.

Pioneer’s West Panhandle properties represent 100% of its working interest in the field.

Credit: Okenergytoday.com February 7, 2018

WPX Energy announces sale of final San Juan Basin assets for $700 million

WPX Energy announced an agreement Monday to sell its holdings in the San Juan Basin’s Gallup oil play to an undisclosed party for $700 million.

WPX didn’t disclose the buyer, though regulatory filings identified the company as Enduring Resources IV LLC. The Gallup oil play had previously been a part of WPX’s plans, producing 10,800 barrels of oil per day (bbl/d) in third-quarter 2017.

The deal is expected to close in the first quarter and completes the company’s exit from the basin.
The Tulsa-based exploration and production company closed on the sale of its legacy natural gas assets in the San Juan Basin for $175 million — after closing adjustments — and a gathering system in the basin for $309 million late last year.

After the sale closes, WPX will have no commercial obligations in the basin, which is in Colorado and New Mexico.

“WPX is now completely focused on our outstanding assets in the top two oil-prone basins in North America — the Permian’s Delaware Basin and North Dakota’s Williston Basin,” said Rick Muncrief, WPX chairman and CEO, in a statement.

Closing Thought: “QUALITY IS NOT AN ACT, IT IS A HABIT.”–ARISTOTLE

Have a great weekend from Oklahoma Minerals!

Talk soon,
Gib Knight

Friday Snippets

Fossil fuel companies big winners from Trump’s tax overhaul

Fossil fuel companies from explorers to refiners and pipeline firms are expected to get a profitability boost from the tax overhaul, with the likes of Valero Energy, Marathon Petroleum, ConocoPhillips and EOG Resources already posting billions of dollars in tax gains. The tax cuts prompted ExxonMobil to announce $50 billion in investments in the US over five years, while smaller drillers such as Murphy Oil will enjoy lower taxes on drilling in the Gulf of Mexico and Texas.

Texas oil industry throws support behind NAFTA

In a resolution passed this week, the Texas Alliance of Energy Producers asked President Donald Trump to maintain the North American Free Trade Agreement even if negotiations fall through. “NAFTA is important to Texas, and if renegotiated, its impact on our markets for oil and gas needs to remain positive and profitable,” said Bob Osborne, chairman of the alliance.

Analysts see healthy pipeline of shale explorer IPOs

Analysts anticipate a surge in initial public offerings by privately held shale producers later this year, as a stronger price environment already prompted four oilfield services firms to go public in January alone. “We’re starting to see these services deals come out, and we would expect, if this continues, there could be several E&P companies coming out to IPO,” Credit Suisse Managing Director Timothy Perry said.

Permian oil industry ends 2017 on a high note

The Texas Permian Basin Petroleum Index ended 2017 up 28.9% from the end of 2016 after expanding for 15 consecutive months in a sign of improvement in the Permian’s oil industry. December activity in the shale play got a boost from rising oil prices, with the rig count averaging 325, the number of drilling permits at 532 and well completions at 416, up 79.3% from the previous December

Breitburn Shareholders To Reopen Ch. 11 Row After $1.8B Bid

Shareholders of Breitburn Energy Partners LP will get the opportunity next week to potentially reopen the court record and further challenge the company’s pending Chapter 11 plan after arguing a recent unsolicited $1.8 billion bid for the oil and gas enterprise should alter asset valuations, a judge decided Monday.

In a first, UAE buys US crude oil

The oil-rich UAE recently imported a 700,000-barrel cargo of US condensate, marking the first time the OPEC producer has purchased oil directly from the US. Despite having its own sufficient crude supply, the UAE often imports condensate to use in its processing plants.

WTI threatens to replace Brent as world oil benchmark

As the shale boom pushes US oil production to multidecade highs and with US crude futures volumes eclipsing Brent volumes in 2017 by the largest margin in seven years, West Texas Intermediate is slowly taking over the most relevant crude oil benchmark. However, international buyers of US crude are calling for a new benchmark with Houston as its delivery point in order to better price US crude oil for export to Asia and other markets.

Production begins at new Gulf of Mexico project

Hess Corp. has begun production at the Stampede field in the US Gulf of Mexico after completing three wells, announced China National Offshore Oil Corp. subsidiary Nexen Petroleum Offshore U.S.A., which is a partner in the project. The field’s processing capacity is about 80,000 barrels of oil per day and 40 million cubic feet of natural gas per day.

Bakken Shale stages a comeback despite Permian competition

North Dakota’s Bakken Shale is on track to break the December 2014 record of 1.23 million barrels of oil per day in the first half of 2018, helped by technological advancements, higher oil prices and new pipeline capacity. However, the Bakken’s revival is overshadowed by the Permian Basin, the “new kid in town” that is “faster, stronger and better looking,” says Bloomberg Intelligence analyst Peter Pulikkan.

Competition between oilfield services giants reaches whole new level

The battle for market share between the world’s biggest oilfield services companies is escalating with Halliburton’s recent attempt to convince the US Patent and Trademark Office to revoke some of rival Schlumberger’s hydraulic fracturing-related patents. The Patent Trial and Appeal Board is reviewing six Schlumberger patents after Halliburton argued the patents are “a classic situation where known elements are combined according to known methods to yield predictable results.”

February 2, 2018

Lilis Energy, Inc. (NYSE American: LLEX), an exploration and development company operating in the Permian Basin of West Texas and Southeastern New Mexico announced today that it has entered into a definitive purchase and sale agreement with OneEnergy Partners Operating, LLC to acquire approximately 2,798 net acres in the Delaware Basin and associated production of approximately 425 net Boepd. Aggregate consideration for the Acquisition is $70 million, consisting of $40 million in cash and $30 million of the Company’s common stock.

The OneEnergy deal adds more than 150 net locations to Lilis’ inventory with potential targets in the Wolfcamp A, XY and B and the 2nd Bone Spring. The mostly contiguous acreage blocks allow for 7,920-ft laterals and adds about 72 gross locations, Lilis said. The acquisition includes average net production of 425 barrels of oil equivalent per day (boe/d).

Deepwater Discoveries

Shell announces large deepwater discovery in Gulf of Mexico
Shell has announced one of its largest U.S. Gulf of Mexico exploration finds in the past decade from the Whale deepwater well. The well encountered more than 1,400 net feet (427 meters) of oil bearing pay. Evaluation of the discovery is ongoing, and appraisal drilling is underway to further delineate the discovery and define development options.

Whale is operated by Shell (60%) and co-owned by Chevron U.S.A. Inc. (40%). It was discovered in the Alaminos Canyon Block 772, adjacent to the Shell-operated Silvertip field and approximately 10-miles from the Shell-operated Perdido platform.

Chevron Announces Major Oil Discovery in Deepwater Gulf of Mexico

Chevron Corporation has announced a significant oil discovery at the Ballymore prospect in the deepwater U.S. Gulf of Mexico.

Ballymore is located in the Mississippi Canyon area of the U.S. Gulf of Mexico, approximately three miles from Chevron’s Blind Faith platform, in water depth of 6,536 feet. The initial Ballymore well reached total measured depth of 29,194 feet and encountered more than 670 feet net oil pay with excellent reservoir and fluid characteristics. A sidetrack well is currently being drilled to further assess the discovery and begin to define development options.

Parsley Issues 2018 Guidance – Sells Permian Non-Op Acreage

Parsley (PE) put out its 2018 guidance and missed on every front. Its production guidance was lowered, capital expenditures were raised, and land was sold for $5,700 an acre (vs recent purchase prices of $30,000+ an acre). Good well results from the emerging Wolfcamp C were insufficient to move the needle, and more questions were raised about Parsley’s capital efficiency and growth path, as well as that of nearby competitors.

The Austin, Texas-based company said it recently closed the sale of about 10,000 net acres in Martin, Howard, Reagan, Irion, Dawson, and Pecos counties in Texas for about $57 million. The assets averaged about 600 barrels of oil equivalent per day (boe/d), according to an operational update released after market close on Jan. 29. This was mostly acreage acquired from Double Eagle Energy in 2017. That transaction was priced at $2.7 billion for 71,000 net acres, which came out to $39,400 per net acre.

Factoid: Oklahoma Earthquakes

In 2008, the state recorded only one earthquake of magnitude 3 or greater (big enough to be felt by people locally). By 2015, the number of earthquakes of equivalent magnitude peaked at a staggering 903.

There are now more than 10,000 injection wells dotted across Oklahoma. Since 2011, well operators have injected on average 2.3 billion barrels of fluid a year into layers of sedimentary rock deep underground.

Gulfport announces modest 2018 production growth target

Gulfport Energy is focusing on fiscal discipline over robust production growth with its 2018 capex budget of $770 million-$800 million and the announced buyback of $100 million of its outstanding stock in 2018.

The Oklahoma City-based producer on Monday also estimated its 2018 full-year net production would come in at an average of 1.25 Bcf of gas equivalent per day to 1.30 Bcfe/d, an increase of approximately 15% to 19% over 2017. This compares with Gulfport’s estimate during its Q3 2017 conference call that it would grow production by 30% year over year in 2018. Gulfport released its 2018 capex budget, along with an update of its fourth-quarter 2017 operations, late Monday afternoon after the close of markets.

EIA REPORT SUMMARY

EIA reports the first weekly rise in U.S. crude supplies of the year

The U.S. Energy Information Administration reported that domestic crude supplies rose 6.8 million barrels for the week ended Jan. 26. That was the first weekly rise reported by the government agency in 11 weeks. Analysts surveyed by S&P Global Platts had forecast a climb of 325,000 barrels, while Price Futures Group expected a rise of 2 million barrels.

The American Petroleum Institute on Tuesday reported an increase of 3.2 million barrels. Gasoline stockpiles, however, fell by 2 million barrels for the week, while distillate stockpiles declined by 1.9 million barrels, according to the EIA.

With refinery maintenance season approaching, some analysts are starting to warn we will begin to see inventory builds and this could hurt prices for a while.

Oil prices are still on track for a fifth monthly gain, despite U.S. crude slipping this week amid a sell-off in both stocks and commodities. Brent crude rose by 3.3 per cent in January, its strongest start to the year for five years.

Oil prices rose on Thursday after a survey showed OPEC’s commitment to its supply cuts remains in place.

U.S. oil production, driven by shale extraction, surpassed 10 million barrels a day in November for the first time in nearly 50 years, according to data released this week by the U.S. Energy Information Administration, reigniting concern the market is oversaturated with crude.

West Texas Intermediate crude (CLH18 March Contract) jumped $1.07 Thursday to close up at $65.80.

International benchmark Brent crude (QAJ18 April Contract) was up 76 cents Thursday to $69.65 a barrel.

NAT GAS NEWS

The outlook has shifted to negative for gas. Perhaps the main reason why February gas prices surged over the past two weeks was the expectation of a new Polar Vortex forming around the Great Lakes region and descending further south into the U.S. in the first week of February. Recent NOAA weather maps, however, indicate far less extreme cold in the region and even some average temperatures in the heating center of the Midwest.

In addition, at 99 Bcf, the U.S. Energy Information Administration on Thursday reported a gas storage withdrawal that was well below the five-year average of 164 Bcf. This very low first withdrawal for the March contract helped dropped prices 15 cents in the morning, and is especially bearish after the two record withdrawals that surged the February contract, 359 Bcf on January 5 and 288 Bcf on January 19. Storage, however, does hold the primary bullish sign for natural gas at this point: inventories now stand 16 percent below the five-year average, compared to 1-2 percent below average a month ago.

March natural gas NGH18, closed Thursday at $2.85 per million British thermal units, down a whopping 60 cents from last Friday, which has retracted due to warmer forecasts and a round of selling amid sentiment of overbought conditions.

52WK RANGE
$2.532 – $3.607

Asset Sale Announced by Samson Oil and Gas Falls Apart

So much for the $41.5 million assets sale announced just a few weeks ago by Samson Oil and Gas Limited.

The Australian-based company with much of its U.S. focus in Colorado, Wyoming, Montana and North Dakota announced the prospective buyer couldn’t get the financing.

The deal with Firehawk Oil and Gas LLC of Denver was announced in January. Firehawk intended to buy Samson’s Foreman Butte project, the largest areal oil field in Samson’s portfolio. It represented nearly all of Samson’s assets.

Also known as the Home Run Field it involved production in two counties in North Dakota, three in Montana and the Mississippian Madison Formation in the Williston Basin.

In recent days, Firehawk indicated it wanted to proceed with the transaction at the stated price and terms, but was unable to complete the financing. The two companies had hoped to wrap up the sale by March 1.

The financial failure has now forced Samson to move ahead with a previously proposed $30 million refinancing. The new funding will allow the company to restart its development drilling program. If things don’t work out, Samson indicated it might elect to pursue another asset sale.

Credit: Okenergytoday.com | February 2, 2018

Midland’s Ted Collins Jr., Passes

Former NAPE chairman and AAPL Lifetime Achievement recipient Ted Collins Jr. passed away on January 28 at the age of 79. A visitation, celebrating the life and memory of Ted, was held at The Branch at Nalley-Pickle & Welch on Wednesday, January 31, 2018. His memorial service was held yesterday and a memorial reception followed at the Petroleum Club of Midland.

Ted will be laid to rest at a private burial service at Greenwood Memorial Park in Fort Worth on Saturday, February 3, 2018. A memorial reception will take place following the burial at 12:00 p.m. at River Crest Country Club on Saturday.

Ted had the moniker, “Ten Percent Ted,” for his entrepreneurial pursuit of oil and gas deals and willingness to quickly make decisions and partner with a number of people and companies.

I had the opportunity a few years back to sit down in his Midland office and visit with Ted and listen to some of his amazing stories. Check out his obituary at http://bit.ly/2nBYZQs and read what an interesting man he really was.

Friday Snippets

Jericho Oil to drill wells in Okla.’s STACK play

Jericho Oil will drill two to five wells in Oklahoma’s Major County to target the Osage formation in the STACK play. The Canadian company, which already operates in the STACK region, has started drilling the first horizontal well and plans to drill the second one within the first half of the year.

Texas Panel Says Basic Owes For Employee Death Litigation

A Texas appeals court on Friday affirmed that, under the plain terms of a contract, well services company Basic Energy Services LP will have to defend and indemnify Exco Resources Inc. and several other energy companies for litigation costs tied to the death of a Basic worker in an accident at a well Exco was operating.

ExxonMobil doubles down on the Permian Basin

ExxonMobil on Tuesday unveiled plans to triple its Permian Basin oil production to 600,000 barrels per day by 2025 and invest over $2 billion in energy infrastructure in West Texas. “With this production growth, we are well-positioned to maximize value as increased supply moves from the Permian to our Gulf Coast refineries and chemical facilities where higher-demand, higher-value products will be manufactured,” said Sara Ortwein, president of ExxonMobil’s onshore shale unit, XTO Energy.

Pa. governor seeks to streamline natural gas well permitting

Pennsylvania Gov. Tom Wolf wants to hire 35 new environmental regulators to help reduce the backlog of natural gas well permit applications, a move that would cost the state $2.5 million. He also proposed more than doubling fees for new well permits from $5,000 to $12,500.

N.M. expects revenue boost amid oil industry revival

More money is expected to flow into New Mexico’s coffers thanks to the oil price rally and the oil industry rebound. Economists lifted New Mexico’s revenue estimates for the current fiscal year by $189 million and by $93 million for the fiscal year beginning July 1.

Increased drilling efficiency affects Texas oil, gas employment

The efficiency gains the oil and natural gas industry has achieved in the last few years put Texas drillers on track to pump a record-breaking amount of oil this year without needing as many workers, rigs or drilling permits as they did before the downturn. Despite climbing from 192,000 at the worst of the oil bust to 223,000 now, Texas oil and gas employment remains at a seven-year low and well below a peak of about 300,000 workers in December 2014.

Natural gas output jumps in Ohio, Pa., W.Va.

Natural gas production in Ohio, Pennsylvania and West Virginia now accounts for 27% of US production, up from 2% in 2008. The three states’ output, which is at a faster rate than they consume, increased from 1.4 billion cubic feet per day in 2008 to about 24 billion cubic feet per day last year, the Energy Information Administration said.

Fracking, horizontal drilling dominate US oil patch

Almost three-quarters of all oil and natural gas wells drilled in the US as of 2016 were hydraulically fractured horizontal wells, according to the Energy Information Administration. Additionally, fracked horizontal wells accounted for about 10.7 million of the nearly 13 million feet of total drilled footage in 2016, the EIA said.

January 26, 2018

Driller in Oklahoma explosion has history of fatal accidents

Ten workers have died over the past decade at well sites linked to drilling contractor Patterson-UTI, the same driller involved in this week’s rig explosion in Oklahoma that killed five workers, federal records show.

An analysis of Occupational Safety and Health Administration data shows the previous accidents happened at drilling sites in Colorado, New Mexico, North Dakota, Pennsylvania and Texas.

The company also was fined nearly $367,000 over the past 10 years for more than 140 safety violations, many of them serious.

Federal and state investigators are working to determine what led to Monday’s blast and resulting fires at the natural gas drilling site near Quinton, about 100 miles (160 kilometers) southeast of Tulsa. An initial incident report indicates there was an uncontrolled release of gas that caught fire and that a worker at the scene tried unsuccessfully to shut down the well.

Monday’s explosion and rig fire appear to be the deadliest oil and gas industry accident since 2010, when 11 workers were killed after an explosion on BP’s Deepwater Horizon rig in the Gulf of Mexico that triggered the biggest offshore oil spill in U.S. history.

Gastar Exploration Inc. announced that it has entered into a definitive purchase and sale agreement to divest its interest in the West Edmund Hunton Lime Unit (“WEHLU”) for $107.5 million.

The transaction, subject to customary closing conditions and adjustments, is expected to close on or before February 28, 2018, with a property sale effective date of October 1, 2017. Gastar received a deposit of 10% of the purchase price on January 25, 2018.

WEHLU is primarily located in Oklahoma and Logan counties, Oklahoma. During the third quarter of 2017, our WEHLU assets’ daily production net to the Company was approximately 2,836 barrels of oil equivalent (“BOE”) comprised of 52% oil, 25% natural gas liquids and 23% natural gas, which constituted 46% of the Company’s total equivalent production for such quarter.

J. Russell Porter, Gastar’s President and CEO, commented, “This divestiture of our WEHLU assets should provide Gastar with sufficient liquidity to fund our core STACK acreage development plan through 2018. Our one rig drilling program has been re-started and we expect to be able to drill and complete approximately 20 operated wells in 2018 to more fully delineate and develop the Meramec and Osage formations on our 65,200 net surface acres in our core STACK position. Due to our large, contiguous acreage position with as many as six potentially productive formations and multiple benches within certain prospective formations, we have a large inventory of undrilled horizontal locations to exploit to create value going forward.”

Warburg Pincus Drops $150M PE Line To Oil Co.

Texas-based oil and gas exploration and production company Stronghold Energy II Holdings LLC received a line of equity financing of up to $150 million from funds affiliated with private equity firm Warburg Pincus, the company announced last week.

Formed in December 2017 and headquartered in Midland, Texas, Stronghold Energy II is focused on the Central Basin Platform of the Permian Basin and intends to acquire meaningful acreage positions for oil and gas development. The team expects to capitalize on its recent success in the region and apply its highly technical geological approach to exploiting areas across the Platform.

Stronghold is led by Steve Weatherl, an Exxon-trained geologist with extensive Permian experience and more than 35 years in the industry, including serving as Vice President of Exploration at another private equity-backed company where he built a Wolfcamp position that ultimately spanned approximately 50,000 acres in the Southern MidlandBasin, and General Manager and Vice President of the Midland Division at EOG Resources, where he ran up to a 10-rig program and invested more than $500 million at attractive rates of return. Mr. Weatherl also served as Vice President of Exploration, USA at Pioneer National Resources and Chief Operating Officer at EnerQuest Oil & Gas.

Factoid: There are more than 900,000 active oil and gas wells in the United States, and more than 130,000 have been drilled since 2010, according to Drillinginfo, a company that provides data and analysis to the drilling industry.

Vanguard Divests Williston; Preps Permian Acreage On To-Sell List

Vanguard, which exited Chapter 11 bankruptcy reorganization in August, sold its Williston working interests and leasehold for gross proceeds of $38.5 million. But two months after laying out plans to sell about 75,847 net acres in the Williston, the Wind River Basin and in Mississippi and Alabama, a more comprehensive post-bankruptcy strategy may be emerging.

Vanguard Natural Resources said it will market about 1,700 net acres in the Delaware Basin, out in Ward County, Texas, adding the asset to the company’s initial 10% portfolio cutback announced last year.

Oseberg Presents First User Forum

OKC based Oseberg held its first User Forum at the 21C Hotel on Wednesday of this week. The event was for orchestrated for users to discover useful tips and tricks and to learn how other companies are using the Oseberg SaaS products.

Headed by CEO Evan Anderson, Oseberg’s Atla application is a fast, sleek and robust oil and gas land, well, and regulatory data access, mapping, and visualization tool that comes with high-speed online data streaming. In this industry, the ability to correctly forecast and spot the next emerging trend can mean the difference between winning and losing.

For more information on the company an its products, contact Brandon Sage at [email protected] or 405.413.5164

Oil futures climbed Wednesday, with the U.S. benchmark settling above $65 a barrel, after the Energy Information Administration reported a tenth weekly decline in a row for U.S. crude stockpiles.

The EIA reported that U.S. crude supplies fell 1.1 million barrels for the week ended Jan. 19, which compares with a draw of 6.9 million barrels for the week to January 12.

Analysts surveyed by S&P Global Platts had forecast a decrease of 1.6 million barrels, while the American Petroleum Institute on Tuesday reported a rise of 4.8 million barrels. The EIA has reported crude-supply declines each week since the report released the day before Thanksgiving.

Cushing declined 3.15 million bbls, and the result of this decline was largely from lower crude imports from Canada.

There has long been a solid link between the direction of the U.S. dollar and oil prices. Because oil is denominated in dollars, a weaker dollar makes oil more attractive to all other currencies. That helps stoke demand for crude, so when the dollar drops, oil tends to rise. As such, the decline of the dollar helped push WTI and Brent to new multi-year highs this week.

West Texas Intermediate crude (CLH18 March Contract) lost 10 cents Thursday to close down at $65.51.

International benchmark Brent crude (QAH18 March Contract) was minus 11 cents Thursday to $70.42 a barrel.

NAT GAS NEWS

Natural gas, meanwhile, saw prices rally to their highest levels in more than a year as traders bet that forecasts that again call for frigid temperatures in parts of the U.S. will prompt further inventory declines.

A blast of cold weather across parts of the U.S. has resulted in unusually strong storage withdrawals for natural gas, and this has brought storage levels to the low end of a five-year range.

The U.S. Energy Information Administration reported Thursday that domestic supplies of natural gas fell by 288 billion cubic feet for the week ended Jan. 19. Analysts surveyed by S&P Global Platts forecast a decrease of 272 billion, while the five-year average withdrawal is 164 billion. Total stocks now stand at 2.296 trillion cubic feet, down 519 billion cubic feet from a year ago, and 486 billion below the five-year average, the government said.

February natural gas NGG18, closed Thursday at $3.45 per million British thermal units, getting closer to the 52 week high of $3.74.

52WK RANGE
$2.56 – $3.74

Breitburn Shareholders Seek To Prolong Ch. 11 Plan Talks

Counsel for a committee of Breitburn Energy Partners LP shareholders seeking to block confirmation of a Chapter 11 restructuring plan that leaves the group empty-handed closed the trial over enterprise valuations on Monday, urging a New York bankruptcy judge to send the sides back to the negotiating table.

EnCap Flatrock raises $3.25 billion to pour into midstream companies

EnCap Flatrock Midstream said it has closed its fourth investment fund, collecting $3.25 billion to pour into companies that transport and store oil and gas.

The San Antonio private equity firm, which has offices in Houston, said it reached its upper limit for investments within six months, overshooting its original $3 billion target.

Its previous fund began investing in May 2014, just before oil prices began a long descent from $100 a barrel to the $40-a-barrel range in a matter of months.

Since 2008, the group has raised about $9 billion from investors to plow into midstream companies that operate pipelines, storage tanks and other energy transportation infrastructure.

Friday Snippets

Permian shale drillers use more water than ever in wells

The amount of water Permian Basin drillers use for one well has nearly quadrupled between 2014 and 2016 to 10.5 million gallons, enough to fill 15.90 Olympic-size swimming pools, but droughts and dry conditions in Texas can result in water sourcing constraints. Producers often get the water they need from brackish or deep, unused aquifers or utilize municipal wastewater, and they are increasingly investing in wastewater recycling systems to mitigate sourcing challenges.

N.M. draws $17M in bids in oil, gas lease sale

The New Mexico State Land Office’s most recent oil and natural gas lease sale attracted bids worth more than $17 million, bringing fiscal year earnings-to-date to almost $122 million, only $1 million below an all-time record set in 2012. The office offered nearly two dozen tracts covering more than 5,600 acres in Chaves and Lea counties.

Texas Oil Driller Settles $618M IRS Dispute In Tax Court

The oil exploration unit of Texas-based Lewis Energy Group LP has reached a settlement with the IRS that will see the company recognize far less income for its 2011 tax year than the $618 million originally sought by the agency, according to a decision entered in the U.S. Tax Court last week.

Southcross’ $815M Deal Shortchanges Investors, Suit Says

Southcross Energy Partners LP and American Midstream Partners LP were hit with a putative class action lawsuit in Texas federal court Monday alleging that an $815 million deal between the companies failed to appropriately consider shareholder value and asking the court to intervene to stop the merger from going through.

Small producers fueling Bakken oil boom

Once a playground for mostly large public oil companies, the Bakken Shale is now increasingly attracting new and smaller operators who are keeping the region’s drilling boom alive by targeting less popular and cheaper Tier 2 and even Tier 3 acreage. “Their business model is to prove up acreage, drill some great wells, show that the acreage works on a consistent basis and then have some company buy them out,” said Wood Mackenzie Lower 48 Upstream Research Director Jonathan Garrett, but this shift could cause initial production rates to drop as firms drill less-prolific wells.

FERC Greenlights Cove Point Pipeline Expansion Project

The Federal Energy Regulatory Commission on Tuesday gave its go-ahead to a unit of Dominion Resources Inc.’s plans for a $147 million project that will add compression to the Cove Point Pipeline in order for it to carry more natural gas to areas on the East Coast.

Discipline is North American producers’ mantra for 2018

North American drillers are stepping up efforts to improve cash flows and boost shareholder returns this year, and Williams Capital Group analyst Gabriele Sorbara predicts moderate production growth in the first half of 2018. Additionally, in their pursuit of greater efficiency, producers will likely turn to testing and completion practices “that work in a $50[/b] to $55 oil world,” Sorbara said.

US oil companies’ foreign cash worth billions awaits repatriation

US oil companies have more than $150 billion in overseas cash combined, but it’s unclear whether the likes of Chevron and ExxonMobil will follow the example of Apple and JPMorgan Chase in taking advantage of a one-time tax rate of 15.5% to repatriate foreign earnings. The new rate was adopted in hopes that it would encourage US firms to reinvest their foreign cash in domestic operations, boosting the US economy in the process, but some economists say oil companies are more likely to return the repatriated cash to shareholders.

Total boosts US Gulf of Mexico footprint

French oil major Total has agreed to buy a 12.5% stake in four blocks covering the Chevron-led Anchor field in the US Gulf of Mexico from Oklahoma-based Samson Energy for an undisclosed sum. “The entry in the Anchor discovery further increases Total’s footprint in deepwater Gulf of Mexico,” said Total President of Exploration & Production Arnaud Breuillac.

January 19, 2018

Schlumberger to end seismic acquisition services

Houston-based oilfield services company Schlumberger will drop its land and marine seismic acquisition business as the downturn in the seismic data industry enters a sixth year, CEO Paal Kibsgaard said. Schlumberger’s WesternGeco, which provides seismic acquisition services, reported $1.6 billion in revenue in last year’s fourth quarter, down 2% from the same quarter in 2016.

U.S. Feb shale output expected to rise to 6.55 mln bpd: EIA

The EIA expects oil production from new wells to grow in each of seven major regions. The Permian Basin of Texas and New Mexico accounts for the bulk of the production increase year-on-year, the data showed. At the same time, production growth in the Bakken formation of North Dakota is seen slower than a year earlier.

The EIA predicted that US shale oil output will climb by 111,000 barrels per day to 6.55 million barrels per day in February. Permian Basin production will likely jump by 76,000 barrels per day to 2.87 million, while oil output in the Eagle Ford Shale and Bakken Shale is seen rising to 1.27 million barrels per day and 1.22 million barrels per day, respectively.

EIA said producers drilled 1,247 wells and completed 1,091 in the biggest shale basins in December, leaving total drilled but uncompleted wells up 156 at a record high 7,493, according to data going back to December 2013.

US gas production to grow next month, driven by Appalachia

US natural gas production is expected to climb by 890 million cubic feet per day to about 64.1 billion cubic feet per day in February, according to the Energy Information Administration. The Appalachian Basin, which includes the Marcellus and Utica shale plays, will lead the gains, with gas output in the region seen rising by 377 million cubic feet per day to 26.7 billion cubic feet per day.

EIA’s report aligns with its forecast made last week that total U.S. natural gas consumption will increase by 3.5 billion cubic feet per day in 2018 and by 2.2 billion cubic feet per day in 2019.

The EIA’s report uses recent data on the total number of drilling rigs in operation in the nation’s seven key regions: Anadarko, Appalachia, Bakken, Eagle Ford, Haynesville, Niobrara and Permian.

The EIA projected gas output would increase in all of the big shale basins in February, except the Anadarko region in Oklahoma and North Texas, which is expected to decline for the first time in 13 months.

Oklahoma oil and gas trade groups support industry tax hike

Two of Oklahoma’s largest oil and natural gas industry trade groups say they support a plan to increase the state’s energy production tax as part of a broad tax plan to help fund a teacher pay raise and stabilize state revenues.

The Oklahoma Independent Petroleum Association and the Oklahoma Oil and Gas Association both announced Tuesday they were backing the plan unveiled last week by a group of state business and civic leaders.

The group “Step Up Oklahoma” endorsed a broad swathe of tax hikes last week to support a $5,000 teacher pay raise, along with some other policy changes. Included in the package was a proposal to increase the gross production tax on new oil and gas wells from 2 percent to 4 percent.

EIA REPORT SUMMARY

U.S. crude stocks drop, led by record outflow from Cushing hub: EIA

U.S. crude oil stocks fell for a ninth straight week, led by a record drawdown at the U.S. storage hub in Cushing, Oklahoma, the Energy Information Administration said on Thursday.

Crude inventories fell 6.9 million barrels in the week to Jan. 12, compared with analysts’ expectations for a decrease of 3.5 million barrels.

Overall crude inventories have been steadily dwindling as demand remains strong and refineries run at a steady clip. Excluding the U.S. Strategic Petroleum Reserve, inventories are now sitting at 412.7 million barrels, the lowest level since February of 2015.

Crude stocks at the Cushing, Oklahoma, delivery hub for U.S. crude futures fell 4.2 million barrels, the largest weekly draw for Cushing dating back to 2004 when records began, the EIA said.

On Wednesday, the American Petroleum Institute reported yet another draw, of 5.12 million barrels.

Oil prices settled little changed Thursday, down a few cents, as weekly U.S. crude production remained close to a record, offsetting support from a ninth week in a row of declines in domestic supplies.

On the New York Mercantile Exchange crude futures for March delivery fell 3 cents to settle at $63.89 a barrel, while on London’s Intercontinental Exchange, Brent fell 0.12% to trade at $69.30 a barrel.

NAT GAS NEWS

On Thursday, the EIA said domestic supplies of natural gas fell by 183 billion cubic feet for the week ended Jan. 12. That was smaller than the decline of 189 billion expected by analysts surveyed by S&P Global Platts and well below the five-year average withdrawal of 203 billion.

February natural gas NGG18, fell 1.3% to $3.189 per million British thermal units, down from Wednesday’s finish at the highest finish since May.

52WK RANGE
$2.56 – $3.74

Remember when: 1908

In 1908, Teddy Roosevelt appointed the National Conservation Commission to take a proper inventory of America’s natural resources and discover areas where egregious waste was occurring. When it delivered its findings to Congress in 1909, the commission reported that the nation’s petroleum supply would last just 25 or 30 years more. Of course, the nation’s oil supply didn’t dry up in 1939; engineers developed new ways to extract oil from what used to be thought of as waste material.

Oil, Gas Producers Among Hardest Hit By US Tax Reforms

U.S. oil and gas producers are among companies hit hardest by new restrictions on tax relief for interest payments, an analysis of the impact of the reforms has shown.

The sweeping overhaul of the U.S. tax system signed into law by President Donald Trump just before Christmas cut the main rate for corporations sharply, but will still mean higher bills for some businesses because it sets limits on deductions for interest payments.

The new law will put pressure on heavily indebted companies to reduce their borrowings, and could push over-burdened companies into steeper decline if their earnings fall.

Companies in industries including oil and gas, coal mining, casinos and trucking are among those likely to be most affected, according to Greensill Capital, a trade finance firm.

In the exploration and production industry, one of the worst affected, if the limits on deductions for 2018-2021 had applied in 2016, companies would have been unable to claim tax relief on 39% of their interest payments, according to Greensill. The limit for 2022 onwards would have prevented relief on 97% of those payments.

Major County in northwest Oklahoma is not normally defined as being a part of the state’s highly-popular STACK oil play, but it’s close. The STACK is typically considered to be in Canadian, Blaine and Kingfisher counties, but Major county is adjacent to the north side of Blaine county.

Chesapeake Operating reported a Mississippi Solid completion in Major County. The BRAVO 28-20-12 1HC, a multi-unit well located in Sections 28 & 33, T20N-R12W. The well was tested flowing 1760 bbl of 41-degree gravity crude, 2769 Mcf of gas and 2505 bbl of water per day.

Drilled to a total depth of 18,553 feet and tested on a 58/64-in. choke, the flowing tubing pressure was 324 psi and initial shut-in pressure of 1437 psi. Perforated intervals were from 8,482 – 18,435 ft. The well went online October 1, 2017.

EXCO Resources files for Chapter 11 bankruptcy protection

Dallas-based EXCO Resources entered Chapter 11 bankruptcy protection this week and is working with creditors on a financial restructuring plan while it explores strategic options, including an asset sale. The company, which has operations in Texas, Louisiana and the Appalachia region, had $105.8 million in liquidity and $1.4 billion in outstanding debt at the end of September 2017.

Despite having taken actions to mitigate the impact of a sustained downturn in commodity prices and uncertainty in the energy market, said EXCO chief executive officer Harold L. Hickey, “we continue to face increasing liquidity pressures as we navigate the competitive environment.”

One such action was the April 2017 agreement to sell Eagle Ford assets to privately held Venado Oil & Gas LLC, Austin, for $300 million

Closing Thought: If you think you are too small to be effective, you have never been in the dark with a mosquito ~ Betty Reese

Have a great weekend from Oklahoma Minerals!

Talk soon,
Gib Knight

Friday Snippets

$102M settlement to resolve Calif. whistleblower suit against BP

BP will pay California $102 million to settle a lawsuit brought by a former employee who said the company violated the California False Claims Act by selling excessively priced “exotic financial derivative products” to state and local governments as well as universities. The settlement amount is a record high for a California whistleblower suit involving an oil company, lawyers for the state said.

N.C. moving slowly to approve permits for $5.5B pipeline

Regulators in North Carolina have delayed decisions on several environmental permits for Dominion Resources’ 600-mile Atlantic Coast Pipeline. The $5.5 billion pipeline needs only a few more regulatory approvals in Virginia and West Virginia.

SM Energy divesting Wyo. assets

SM Energy is selling 112,200 acres in Wyoming’s Powder River Basin — representing about 80% of its position in the region — to Denver-based Northwoods Energy for $500 million in cash. The move comes as the company focuses on developing its assets in Texas’ Midland Basin and Eagle Ford Shale.

How tech and science have revolutionized oil drilling

The advent of hydraulic fracturing, new drilling techniques and developments in seismic exploration technology have transformed oil drilling, changing its artistic nature and turning it into a more exact science. The oil industry is increasingly turning to technology and automation as the key question for drillers shifts from “Will this well pay out?” to “How can I pay out faster and more efficiently within cash flow?” says ProPetro co-founder and CEO Dale Redman.

Fracking firms kick off 2018 on a strong footing

After being dealt the hardest blow during the oil downturn, fracking service providers are off to a great 2018 start, with Schlumberger and Baker Hughes emerging as the best performers of the S&P 500 Energy Index so far this year. Smaller competitors aren’t doing badly either, with Denver-based Liberty Oilfield Services surging 28% in market trading on Friday, its first day as a public company.

Permian dealmaking activity slows down at end of 2017

Permian Basin dealmaking was off to a strong start in early 2017, with $46 billion worth of deals in the first half of the year, but activity lost momentum in the second half with just $18 billion worth of deals as market conditions changed, according to research firm 1Derrick. Chief Operating Officer Mangesh Hirve anticipates a busy 2018, with plenty of merger and acquisition deals targeting not only the Permian Basin, but also other shale plays such as the SCOOP and STACK, Niobrara, Bakken, Marcellus, Utica and Haynesville.

US inches closer to achieving net gas exporter status

Surging natural gas flows to Mexico and booming liquefied natural gas exports put the US on track to be a net exporter of natural gas for the first time since 1957 this year, according to the Energy Department. By 2019, the US is expected to have the world’s third-largest LNG capacity while pipeline capacity to Mexico should double.

Hess cutting around 300 positions

Hess will shed about 300 jobs, representing 13% of its workforce, this year amid pressure from activist investor Elliott Management, which wants the company to scale back operations. The job cuts combined with a stronger portfolio should allow the company to slash production costs by 30% to less than $10 per barrel by 2020, said Hess spokeswoman Lorrie Hecker.

IEA warns $65-to-$70 oil could spur shale oil production in the US

International Energy Agency Executive Director Fatih Birol said at a conference in Abu Dhabi that oil prices in the $65-to-$70-per-barrel range benefit producers for now, but he warned that if the current level persists, it could prompt US shale drillers to pump more oil.

N.D. anticipates record-breaking oil production in 2018

North Dakota’s Department of Mineral Resources expects oil production in the state to reach record levels this year after drillers pumped 1.19 million barrels per day in November, just shy of the record of 1.23 million barrels per day set in December 2014. Natural gas production in November rose 1.4% from October to set a record of 2.1 billion cubic feet per day.

January 12, 2018

US oil production to hit record earlier than expected

The Energy Information Administration expects US oil output to cross the 10-million-barrel mark in February and average 10.04 million barrels per day in the first quarter — a level previously forecast to be reached no earlier than the fourth quarter. The EIA also lifted its 2018 production growth forecast from 780,000 barrels per day to 970,000 barrels per day and predicted that 2019 output will climb by 580,000 barrels per day to 10.85 million barrels per day.

Much of the production growth will be concentrated in the Permian Basin, the largest U.S. oilfield stretching across Texas and New Mexico, said John Staub, the EIA director of the office of petroleum, natural gas and biofuels analysis. As a result, pipeline capacity constraints should not be a major limiting factor in starting new production, he said.

Oklahoma saw an increase of about 50% in tax collections from oil and natural gas production in 2017 from 2016, with oil and gas revenue up 42.7% to $56.2 million in December from the same month in 2015. Revenue from gross production taxes was $537.2 million for the year, up 53.4% from 2015, a sign the state’s economy is recovering.

According to the federal government, Oklahoma holds about 4 percent of total U.S. petroleum reserves and accounts for about 5 percent of total oil production. Of the 100 largest natural gas fields in the United States, 14 of them are in Oklahoma.

A day after the American Petroleum Institute took markets by surprise with a massive, 11-million-barrel inventory draw, the Energy Information Administration reported the draw was actually much smaller, at 4.9 million barrels.

Analysts had forecast a draw of 3.5 million barrels, with gasoline stockpiles seen to have increased by 2.3 million barrels in the first week of January. Gasoline stockpiles, according to the EIA rose by a hefty 4.1 million barrels in the reporting period.

The EIA report showed gasoline stockpiles rose 5.7 million barrels for the week, while distillate stockpiles declined by 1.4 million barrels.

OIL AND GAS PRICES

Oklahoma sweet crude tops $60 a barrel

The price for Oklahoma sweet crude oil topped $60 a barrel for the first time in more than three years. Oklahoma oil typically trades at a discount to U.S. benchmark West Texas Intermediate crude.

Oil prices rose on Thursday as a pipeline outage in Britain continued to support prices despite forecasts showing a global crude surplus in the beginning of next year.

West Texas Intermediate for January delivery rose 44 cents to settle at $57.04 a barrel on the New York Mercantile Exchange.

Brent for February settlement added 87 cents to end the session at $63.31 on the London-based ICE Futures Europe exchange.

NAT GAS NEWS

While cold in the South is always bullish for natural gas, the extreme cold in the East has been very bullish driving down the storage levels of natural gas.

The primary reason natural gas futures prices entered winter well below $3 per Mcf was that natural gas production was rising, natural gas storage was above the five year average, and the forecasts were for milder winter temperatures in the Midwest and the East. It turns out the weather has been much colder than most forecasters predicted.

The U.S. Energy Information Administration reported Thursday that domestic supplies of natural gas fell by 359 billion cubic feet for the week ended Jan. 5. Analysts surveyed by S&P Global Platts forecast a decrease of 337 billion, while the five-year average withdrawal is 169 billion. Total stocks now stand at 2.767 trillion cubic feet, down 415 billion cubic feet from a year ago, and 382 billion below the five-year average, the government said.

February natural gas NGG18, rose 17.8 cents, to settle at $3.084 per million British thermal units on the New York Mercantile Exchange—the highest finish for a most-active contract since Nov. 29, 2017.

52WK RANGE
$2.56 – $3.74

Remember when: Salt Creek Oil Field – Wyoming

Initial development of Salt Creek Oil field commenced in 1889 with the majority of primary development occurring between 1915 and 1930,” notes the U.S. Department of the Interior. “Early records indicate that oil was found at depths as shallow as 22 feet in 1911.

By 1930, about one-fifth of all oil produced in the United States came from Salt Creek. More than 4,000 oil wells have since been drilled in the ten producing zones of the 22,000-acre field. In 2007 alone, Salt Creek produced almost three million barrels of oil and more than 650 million barrels of oil over the last 100 years

US shale sector ripe for consolidation

Mergers and acquisitions in the US shale patch are the key to better returns and improved cash flows because they can help reduce operating costs for shale firms, according to Ben Dell, managing partner at Kimmeridge Energy Management. Dell sees more than 40 companies in the Permian Basin that would make great takeover targets and eight drillers in Colorado’s Niobrara field that could lower expenses by more than $1 billion if they agreed to merge.

“You’re going to see an increasing amount of investors get involved in the space, looking to force companies into combinations,” Dell said in a telephone interview. “The reality is if you weren’t motivated by preserving your job, you would run these companies completely differently.”

Closing Thought: The game of life is a lot like football. You have to tackle your problems, block your fears, and score your points when you get the opportunity. — Lewis Grizzard

Have a great weekend from Oklahoma Minerals!

Talk soon,
Gib Knight

Friday Snippets

Oil, gas industry braces for new millennial-based workforce

A phenomenon called “The Great Crew Change” will come to the oil and natural gas industry soon, with a millennial-focused workforce on the horizon. It’s expected that about half of the industry’s workforce will retire in the next decade, making a transfer of knowledge to the next generation of growing importance now.

Report: Deepwater output in Gulf could grow 13%

The production of oil and natural gas in the Gulf of Mexico could reach 1.9 million barrels of oil equivalent in 2018, a 13% increase from 2017, according to a report from Wood Mackenzie. New automated drilling technologies are allowing for more efficient and cost-effective drilling from deepwater locations.

Breitburn Asset Valuations At Heart Of Ch. 11 Plan Fight

Shareholders of Breitburn Energy Partners LP told a New York bankruptcy court that the company’s plan to sell its assets to a group of secured and unsecured creditors should not be approved because it undervalues the debtors’ assets by about $2 billion, to the detriment of equity holders.

Pa. Shale Landowners Want Arbitration Ruling Revisited

More than 600 Marcellus Shale landowners asked a Pennsylvania federal court to reconsider its refusal to permit “class” arbitration in their gas royalties fight with Chesapeake Energy Corp. and others, arguing they want their individual claims arbitrated together, not as a class.

Offshore oil drilling to focus on eastern Gulf of Mexico

The energy industry’s primary interest will be the eastern portion of the Gulf of Mexico, even though the Trump administration wants to open almost all offshore US waters to drilling for oil and natural gas. Most of the eastern Gulf has been off-limits since 2006 because of military testing.

Ohio and Pa. show continued strength with drilling permits

The Ohio Department of Natural Resources issued 10 more oil and natural gas permits in the final two months of 2017 than it did in 2016 in the Utica, Point Pleasant and Marcellus shale plays. In total, there are 2,236 wells drilled and 1,787 wells that are producing in southeastern Ohio.

Texas drilling permits down in Dec.

The number of oil and natural gas drilling permits issued by the Texas Railroad Commission fell by 12% from December 2016 to 885 last month, while total completions in 2017 declined 34% year-on-year to 6,914. The number of active wells Texas had in December was 317,864, an increase of 11,000 from December 2016.

Texas Justices Urged To Reverse Anadarko Win In Lease Fight

TRO-X LP told the Texas Supreme Court in oral arguments Tuesday that it was wrongly stripped of a trial court win that gave it a working interest in five oil and gas leases when an appellate court determined that landowners had intended to terminate their TRO-X leases when they executed new ones with Anadarko Petroleum.

BP Pays $102M To Settle Calif. Gas Overcharge Suit

BP PLC has agreed to pay California and a whistleblower $102 million to settle a suit alleging it intentionally overcharged the Golden State for natural gas in violation of contractual caps, just as the case was set to go to trial in state court, according to lawyers for the whistleblower.

December 15, 2017

Fort Worth-based Pegasus Resources LLC has received a $300 million equity commitment from EnCap Investments LP, the company said on Dec. 11.

Pegasus, a mineral and royalty company, will focus on acquiring and managing mineral and royalty properties located in the core of established and rapidly emerging resource plays, primarily the Permian Basin.

“Our team has spent years working together and has a proven track record of successful collaboration and value creation,” said George M. Young Jr., Pegasus’ Chief Executive Officer. “Our plan is to leverage our extensive network of energy industry relationships, coupled with EnCap’s financial strength and expertise, to assemble an attractive portfolio of high-return properties during an advantageous point in the price cycle. We have already seen a significant amount of deal flow and look forward to continuing to source, negotiate and close mineral acquisitions.”

Drillers have been developing the Anadarko Basin since the 1930s, but drilling activity levels started picking up around 2007 when Devon and Cimarex began drilling the first horizontal wells.

Newfield Exploration was the first to discover the STACK, which it unveiled in late 2013 to denote not just the location but the fact that it was “stacked” with several hydrocarbon-rich layers, including the Woodford, Meramec, and Osage.

Devon currently has the top acreage position in the STACK. The company controls at least 5,700 drilling locations in the region, with the potential for that number to rise to more than 11,000 in the future.

Trailing behind Devon in acreage positions are other well known and active horizontal operators, Newfield, Continental Resources, Marathon, and Cimarex.

The STACK is an acronym for Sooner Trend Anadarko Canadian and Kingfisher. It designates the shale formations (the Sooner Trend, which consists of the Meramec and Woodford shale layers) as well as the location of the Anadarko Basin centered in Canadian and Kingfisher counties of Oklahoma. It’s one of two hydrocarbon-rich hot spots in the western part of the state along with the SCOOP, or South Central Oklahoma Oil Province.

Data from the U.S. Energy Information Administration Wednesday showed that domestic crude supplies fell by 5.1 million barrels for the week ended Dec. 8. That was bigger than the forecast for a decline of 4 million barrels from analysts. The American Petroleum Institute on Tuesday had reported a drop of 7.4 million barrels.

The EIA report showed gasoline stockpiles rose 5.7 million barrels for the week, while distillate stockpiles declined by 1.4 million barrels.

In the near-term, Morgan Stanley in its recent report is predicting gas prices will likely bounce to the $3.15 level through the rest of the winter before sliding back to an average price of $2.90 in 2018 and then drifting lower to $2.80 in 2019.

Natural gas January futures closed Thursday at $2.691 per million BTUs, up $0.007

2015 was an historic year for oil markets, one that few will forget. At the beginning of the year, crude oil was well on its way to the lowest point since the financial crisis, dropping into the $40s in January. Prices bounced around, rebounded into the $60s by early summer, and then declined again for the rest of the year.

On Friday, December 30, 2015, WTI rose 44 cents to $37.04 a barrel. It slid 11 percent in December and 30 percent for the year, after a 46 percent loss in 2014. Brent, the global benchmark, fell 35% for the year and closed at $37.28 to end 2015.

The oil and gas industry had depended on debt to underwrite the shale drilling boom and debt started to pile up in 2015 as oil prices crashed. Oil majors raised a of debt – $31 billion – in the first two months of the year. Smaller companies were struggling under the weight of their rising debt loads. The junk bond market was dragged down in 2015 because of distressed oil and gas companies.

Aftermath

By April of 2017, Haynes and Boone had tracked 123 North American oil and gas producers that filed for bankruptcy since the beginning of 2015. These bankruptcies, including Chapter 7, Chapter 11, Chapter 15, and Canadian cases, involved approximately $79.9 billion in cumulative secured and unsecured debt.

Carrizo selling Eagle Ford acreage for $245 million in cash

Houston-based Carrizo Oil & Gas Inc. struck a deal to sell part of its assets in the Eagle Ford Shale for $245 million in cash, according to a Dec. 12 press release.

The deal is expected to close by the end of January, but the buyer was not disclosed in the press release.

Carrizo is selling about 24,500 net acres, which are mostly located in the “downdip area of the volatile oil window,” per the release. The deal also includes associated net production during the third quarter of 2017 of about 3,400 barrels of oil equivalent per day, composed of 63 percent oil, 19 percent gas and 18 percent natural gas liquids.

The divested assets’ production accounts for less than 10 percent of Carrizo’s total in the Eagle Ford, and the company will retain about 78,500 net acres in the shale play.

Carrizo received between $5,000 and $5,500 per net undeveloped acre for the asset, based on an estimated $120 million worth of production, Tudor, Pickering, Holt & Co. (TPH) said in a Dec. 12 report.

Carrizo has sold off some $530 million in assets in a divestiture program this year. One reason the company sold off these Eagle Ford acres is to use the proceeds to retire more of its debt.

Denver based FourPoint Energy raises $525M, spends $188M on new deal

Denver oil and gas company FourPoint Energy LLC said this week it has raised $525 million from investors and also closed a deal to buy assets in the Texas Panhandle.

Privately-held FourPoint said it will continue to grow in its focus areas: The Anadarko Basin, which sprawls across the Oklahoma-Texas border in the Panhandle area; and the Permian Basin, in southeastern New Mexico and across the border into Texas.

The new money will allow the company “to continue to grow through strategic acquisitions in the Anadarko and Permian Basins while executing on our active drilling program in the Anadarko Basin,” said George Solich, FourPoint’s president and CEO.

FourPoint held about 755,000 net acres in the Western Anadarko as of September, according to a presentation made by George Solich, FourPoint’s president and CEO, at Hart Energy’s DUG Midcontinent conference.

Closing Thought: “Ask yourself if what you’re doing today will get you closer to where you want to be tomorrow.” —Anonymous

Have a great weekend from Oklahoma Minerals!

Talk soon,
Gib Knight

Friday Snippets

Oil industry to maintain momentum in 2018, Moody’s says

The oil and natural gas industry is expected to continue on its growth trajectory next year even though production increases will likely keep oil prices in the $40-to-$60-per-barrel range through 2019, according to the Moody’s oil outlook for 2018. Exploration and production companies and oilfield service firms could see earnings rise by 10% to 12% in 2018, with the North American onshore market providing the best opportunities for growth.

N.M. oil, gas lease sale generates $30M

A Bureau of Land Management lease sale of more than 2,100 acres in New Mexico’s Eddy and Lea counties drew more than $30 million worth of bids. The sale also set a new record for the highest bid per acre at $40,001.

N.D. adopts new rule on oil, gas royalties

In an attempt to boost transparency, the North Dakota Industrial Commission last week passed a rule requiring oil and natural gas companies to provide explanations each time they make a deduction from mineral owners’ royalty checks. The North Dakota Petroleum Council said the rule could cost the industry several million dollars.

Pa. Appeals Court Kills Bid To Revive EQT Royalty Claims

A Pennsylvania appeals court on Friday shot down efforts by a pair of landowners to revive claims that they were denied the full value of royalty payments they say they’re owed under a contract allowing an EQT Corp. unit to drill for natural gas below their property.

Permian output growing faster than pipeline capacity

Despite the slate of new pipelines planned for the Permian Basin, Morningstar’s Sandy Fielden warned that producers may be forced to sell their oil at a huge discount next year as Permian output keeps outpacing takeaway capacity. However, “Pipeline squeezes don’t last long in the shale era, and they encourage midstream companies to accelerate new projects to expand existing capacity to fill the gap,” Fielden said.

Panama Canal expansion not working out as planned for US shale gas exporters

US liquefied natural gas producers’ only hope for faster trips to Asian markets is growing dim as LNG tankers are being left out of the newly expanded Panama Canal in favor of consumer goods vessels. The Panama Canal Authority only allows one LNG tanker per day to pass through the waterway and said it has no plans to award LNG exporters an additional slot until they get better at sticking to timetables — a challenge that could hinder the US shale gas export boom.

Interior Dept. postpones implementation of methane rule

The Bureau of Land Management said it would delay an Obama-era rule placing restrictions on methane emissions from oil and natural gas operations on federal and tribal lands until Jan. 17, 2019. The rule will be suspended to “avoid imposing likely considerable and immediate compliance costs on operators for requirements that may be rescinded or significantly revised in the near future,” the BLM said.

Okla. tax revenue gets boost from oil, gas industry

Gross tax receipts collected by the Oklahoma Treasury in November rose 12% from the same month last year to $893.4 million. The oil and natural gas industry paid $52.7 million in taxes during the month, an increase of 54.8% from November 2016 and up 1.3% from October.

US onshore drilling permit issuances could hit 5,000 in December — the highest monthly level of this year — if oil prices maintain their gains, according to investment bank Evercore ISI. The number of drilling permits issued in the first eight days of December reached 2,460, with New Mexico leading the gains.

Agency to examine new oil possibilities in N.D.

The US Geological Survey has agreed to reassess the amount of oil that could be found in North Dakota, taking into account 17 formations in the oil region in the western part of the state. The formations could be developed with drilling and hydraulic fracturing technology now used in the Bakken and Three Forks formations, government and industry representatives say.

December 8, 2017

Bill Barrett Corp., one of Colorado’s largest publicly-traded oil and gas producers, plans to combine with privately-held Fifth Creek Energy in a deal valued at $649 million.

The two Denver-based companies will become subsidiaries of a new public holding company that will control 151,100 net acres and an inventory of 2,865 undeveloped drilling locations in the Hereford Field in rural northern Weld County.

Compared to other parts of the Denver-Julesburg Basin, the Hereford’s output skews more towards oil, which made up 84 percent of output from recently drilled wells. The combined company plans to operate three drilling rigs next year and spend $500 million to $600 million to boost production.

Bill Barrett CEO and president Scot Woodall will serve as chief executive of the new company, whose board will consist of Bill Barrett’s six current directors and five directors that Fifth Creek will appoint.

Bill Barrett also said Wednesday it had raised $105 million in a public offering of 21 million shares to help fund future spending. Investors, however, didn’t react well, pushing the company’s shares down 18.7 percent to $4.65 a share.

The merger is expected to take place in the first quarter or early second quarter pending shareholder and regulatory approvals.

The offerings include Continental’s interests in more than 80 wells plus leasehold acreage in the Mississippian and Woodford Shale in Garfield and Kingfisher counties, Okla. Each package includes average net income of at least $16,000 per month, EnergyNet said.

The field discovery well was on July 16, 1926, a wildcat well near Seminole, about an hour east and south of Oklahoma City, that launched a drilling and production frenzy. The Fixico No. 1 well revealed the prolific Wilcox sands at about 4,075 feet deep.

By 1935, the new oilfields around Seminole became the largest supplier of oil in the world. More than 60 petroleum reservoirs were found in 1,300 square miles – and seven were “giants,” producing more than million barrels of oil each.

EIA REPORT SUMMARY

EIA reports a fall in U.S. crude supply, but gasoline stocks rise more than expected.

Data from the U.S. Energy Information Administration Wednesday showed that domestic crude supplies fell 5.6 million barrels for the week ended Dec. 1. That was bigger than the forecast for a decline of 4.1 million barrels from analysts surveyed by S&P Global Platts. The report included another SPR release of 2.4M barrels. Combined with the SPR, total crude inventories drew by almost 8M barrels.

The American Petroleum Institute on Tuesday had reported a drop of 5.5 million barrels. Gasoline stockpiles jumped by 6.8 million barrels for the week, while distillate stockpiles added 1.7 million barrels, according to the EIA.

(Bloomberg)-A day after fears over mounting U.S. fuel inventories sent future prices spiraling downward, they clawed back a portion of their descent on Thursday, gaining 1.3% in New York.

West Texas Intermediate for January delivery rose 73 cents to settle at $56.69 a barrel on the New York Mercantile Exchange. Total volume traded was about 25 percent below the 100-day average.

Brent for February settlement added 98 cents to end the session at $62.20 on the London-based ICE Futures Europe exchange. The global benchmark traded at a premium of $5.45 to February WTI.

NAT GAS NEWS

Weekly Gas Storage: Surprise Build

Last week, the inventory declined by 33 billion cubic feet against an expectation of 37 billion cubic feet drawdown.

EIA reported a much more bearish than expected storage report today. To give you a sense of how bearish this week was, we came into 12/1 week expecting -20 Bcf. Previously leading up to the week, we had -35 Bcf.

The EIA reported a +2 Bcf change in storage, bringing the total storage number to 3.695 Tcf. This compares to the -43 Bcf change last year and -69 Bcf change for the five-year average.

Overall natural gas spot price movements were mixed this report week (Wednesday, November 29 to Wednesday, December 6, 2017). The Henry Hub national benchmark spot price fell from $3.06 per million British thermal units (MMBtu) over the report week to $2.92/MMBtu (Wednesday)

Natural gas January futures closed Thursday at $2.763 per million BTUs, down $0.159

Remember when: King Ranch Lease

The largest U.S. private oil lease ever negotiated was signed in 1933. The 825,000 acre King Ranch oil deal with Humble Oil and Refining will lead to ExxonMobil. The agreement, which has produced more than $1 billion in royalties, has been extended ever since.

Subsequent leases from neighboring ranches gave Humble Oil and Refining nearly two million acres of mineral rights between Corpus Christi and the Rio Grande River. The first successful oil well on the King Ranch was completed in 1939.

Valorem Energy, LLC, an independent oil and natural gas company headquartered in Oklahoma City, and backed by the Kayne Private Energy Income Fund, L.P., announced that it has closed on its acquisition of LINN Energy, Inc.’s Williston Basin interests for a purchase price of $285 million, subject to customary purchase price adjustments.

The acquired assets consist of approximately 20,000 net acres in North Dakota, South Dakota and Montana with estimated third quarter net production of 8,750 barrels of oil equivalent per day. The sale has an effective date of March 1, 2017.

Founded in 2017, Valorem is a private exploration and production company formed to deploy over $1 billion of capital to acquire and operate large, producing onshore U.S. oil and gas assets, with an emphasis on the Rockies and Mid-Continent.

Closing Thought: I don’t make jokes. I just watch the government and report the facts. ~Will Rogers

Have a great weekend from Oklahoma Minerals!

Talk soon,
Gib Knight

Friday Snippets

Houston overtaking Okla. city as oil-trading hub

Houston is overtaking Cushing, Okla., as a global hub for oil trading, with US crude exports flowing from the Gulf of Mexico and Houston setting the price for West Texas Intermediate crude that is closer to the Brent global benchmark. “Cushing is becoming irrelevant,” said energy economist Philip Verleger.

US crude inventories seen declining

The Energy Information Administration is expected to report a 2.5-million-barrel decline in crude stockpiles for last week, according to a Bloomberg survey. “Looking ahead, we see the tightening of the global oil market balance slowing and partially reversing,” said Norbert Ruecker of Julius Baer Group.

EnCap closes energy fund at $7B

Houston-based private equity firm EnCap Investments closed its latest energy fund at $7 billion, above its $6.5 billion target. The fund will target the oil and natural gas exploration and production industry, particularly in the Permian Basin and Oklahoma’s SCOOP and STACK plays.

US tax changes seen as boon to oil refiners

US oil refiners could emerge as the biggest winners from the corporate tax reduction thanks to their unique ability to generate positive pre-tax income, according to Piper Jaffray analyst Guy Baber. For example, Baber estimates Andeavor’s earnings per share could climb by 20% to $11.23 next year due to the tax cut.

Ex-Statoil Exec’s Wife Wants Out Of Trade Secrets Suit

The wife of a former Statoil unit chief argued Friday that the court should dismiss the company’s claims against her because it had failed to prove she knew about her husband’s alleged scheme to steal information and technology to benefit a business he set up after leaving the company.

The Appalachian Basin has been the main driver of the US shale gas boom since 2012, with natural gas production in the region climbing from 7.8 billion cubic feet per day in 2012 to 23.8 billion cubic feet per day this year through October, according to the Energy Information Administration. Well productivity in Appalachia — which includes the Marcellus and Utica shale plays — has increased by 10.8 million cubic feet per day since 2012 thanks to technological advancements, hydraulic fracturing, longer laterals and better well targeting.

US shale players renew commitment to value over growth

Despite OPEC’s latest agreement to extend production cuts, the biggest US shale players including Pioneer Natural Resources, Newfield Exploration and Parsley Energy vowed to stay the financial discipline course and continue to focus on improving cash flows and returns to investors. “Higher oil prices can bring in more cash to the balance sheet, and you can enjoy that cushion, but there’s no need to chase additional activity,” Parsley President and Chief Operating Officer Matt Gallagher said.

Millions of acres in Alaska petroleum reserve up for bid in lease sale

The Bureau of Land Management today will offer 10 million acres in the National Petroleum Reserve in Alaska for energy exploration in what would be the single-largest oil lease sale ever held there. The US Geological Survey estimates the NPR-A contains 896 million barrels of recoverable oil and 52.8 trillion cubic feet of natural gas.

Okla. producers coring up in western part of STACK play

Operators in Oklahoma’s STACK play are shifting their focus from the play’s traditional core areas in Kingfisher and Canadian counties to the western portion of the basin in Blaine County, where drillers such as Devon Energy and Continental Resources have started amassing top positions. Devon recently achieved a record peak 24-hour initial production rate of 5,100 barrels of oil equivalent per day at its Faith Marie well in Blaine County.

Lease sale in Alaska petroleum reserve draws little interest

The Bureau of Land Management’s Wednesday lease sale in the National Petroleum Reserve in Alaska attracted just seven bids worth $1.16 million, compared with $18.8 million worth of bids received during last year’s NPR-A lease sale. Meanwhile, a lease sale held Wednesday by the Alaska Oil and Gas Division for state land generated $19.9 million from more than 100 bids.

Chevron announces lower capital budget for 2018

US oil giant Chevron is trimming its budget for capital projects next year by about 4% from 2017 to $18.3 billion, marking the fourth straight year the company has cut spending. Of that amount, $15.8 billion will go toward oil and natural gas exploration, including $4.3 billion worth of investments in shale.ston

December 1, 20177

Carrizo Oil & Gas Sells Off Last Of Non-Core Assets For $140M

Carrizo Oil & Gas Inc. announced Monday that it sold the last of its non-core assets – in the Denver-Julesburg Basin in the Rockies – to an unnamed buyer for $140 million and up to $15 million in contingent payments over the next three years. The company’s CEO, Chip Johnson, said in a statement that the sale will help Carrizo further reduce its debt load and position it to deliver “strong, high-return production growth within cash flow.”

The sale worked out to about $2,500 per acre below a recent transaction by Denver-based Bonanza Creek Energy Inc. at $5,200 per acre, Simmons & Co. International analyst Kashy Harrison said.

Carrizo has streamlined the portfolio to two core assets – 103,000 net acres in South Texas’ Eagle Ford Shale and 43,600 net acres in West Texas’ and New Mexico’s Delaware Basin.

Marathon Oil – Snapshot 3Q 2017 – STACK & SCOOP

Oklahoma is a top priority for Marathon Oil, and there’s no doubt that the evolving STACK play in the Anadarko Basin is one of the best unconventional oil plays in the U.S. But the company history in Oklahoma dates back for more than 100 years.

At year-end 2016, we held approximately 365,000 net surface acres in the Oklahoma Resource Basins. In the STACK and SCOOP areas, we’re in the Woodford, Springer, Meramec, Osage, Oswego, Granite Wash and other Pennsylvanian and Mississippian plays.

Marathon unconventional Oklahoma production averaged 58,000 net boed during 3Q 2017. That’s up 18% over 2Q 2017, and more than 40% higher than a year ago. The company brought 15 gross operated wells to sales during the quarter predominately focused on leasehold capture and delineation activity. For the balance of the year they expect to bring 20-25 wells to sales, about 40% of which will be leasehold protection.

Factoid: EAST TEXAS OILFIELD

The East Texas oilfield, located in central Gregg, western Rusk, southern Upshur, southeastern Smith, and northeastern Cherokee counties in the east central part of the state, is the largest and most prolific oil reservoir in the contiguous United States. Since its discovery on October 5, 1930, some 30,340 wells have been drilled within its 140,000 acres to yield nearly 5.2 billion barrels of oil from a stratigraphic trap in the Eagle Ford-Woodbine group of the Cretaceous. The source of its primary recovery was a strong water drive. Because the field is so large geographically the first wells, located several miles apart, were originally regarded as discovery wells in separate fields. After the spaces between the first wells were drilled, it was revealed that all sectors drew oil from the same Woodbine sands. The giant field was named for its geographic region. The first discovery in the East Texas field came in Rusk County. It was there in the summer of 1927 that Columbus Marion (Dad) Joiner, a sixty-seven-year-old promoter from Ardmore, Oklahoma, took mineral leases on several thousand acres of land with the intention of selling certificates of interest in a syndicate.

EIA REPORT SUMMARY

On Wednesday, the Energy Information Administration said domestic crude oil stocks were drawn down by 3.4 million bbl to 453.1 million bbl in the week-ended Nov. 24, while down 7.0% year-over-year, as crude demand increased.

The EIA report showed bearish products data however, with gasoline and middle distillate stocks rising by 3.6 million bbl and 2.7 million bbl, respectively, as demand for products fell during the week reviewed.

According to the most recent EIA data, Oklahoma production averaged 469,000 barrels a day in September, up 14 percent from one year ago and up more than 150 percent from 185,000 barrels a day in September 2007.

US crude ticks up 10 cents, settling at $57.40, after producers extend output cuts through 2018

Oil prices were higher on Thursday after two dozen producer nations agreed to extend a deal to limit their production through 2018.

Oil prices have slipped from the two-year highs hit last week by both crude benchmarks on signs that U.S. supply is rising and could potentially undermine OPEC’s efforts to tighten the market.

U.S. West Texas Intermediate crude ended Thursday’s session up 10 cents at $57.40. It has fallen 2.6 percent since last week, pressured by a faster-than-expected restart to the Keystone pipeline and a rise in U.S. stockpiles of gasoline and distillate fuels.

NAT GAS NEWS

The Energy Information Administration (EIA) reported a net withdrawal from natural gas stocks Thursday that fell on the bearish side of market expectations, but the report failed to move the needle in the January contract as forecast December cold remained the focus.

For the week ended Nov. 24, EIA reported a net 33 Bcf withdrawal from U.S. gas stocks. Last year 43 Bcf was withdrawn, and the five-year average for the period is a withdrawal of 47 Bcf.

The market had been anticipating a slightly larger withdrawal than the final number.

A Reuters survey of traders and analysts had predicted on average a 37 Bcf withdrawal for the week, with responses ranging from -28 Bcf to -54 Bcf. Kyle Cooper of ION Energy expected a 33 Bcf withdrawal, while Stephen Smith Energy Associates was calling for a withdrawal of 41 Bcf, lower than an original estimate for a 45 Bcf withdrawal.

A decade ago, natural gas prices were still regularly spiking above $10/million BTU (MMBtu). Over the past three years, high inventories have mostly kept prices below $3/MMBtu.

The highest close for the past five trading days was registered Tuesday at $3.13. The 52-week range for natural gas is $2.90 to $3.83. One year ago the price for a million BTUs was around $3.59.

Natural gas January futures closed Thursday at $3.025 per million BTUs.

Remember when: Yount-Lee Oil Company

The Yount-Lee Oil Company, founded in 1914, was the successor to the Yount-Rothwell Oil Company which had been formed earlier by Miles Franklin Yount and Talbot Frederick Rothwell. It was part of the Texas Oil Boom period.

With a new fusion of capital provided by T. P. Lee, Yount was confident that the Spindletop oil field in southeast Texas had not been tapped out, so he set about acquiring large tracts of land in the area. On November 14, 1925, his McFaddin No. 2 well struck oil at about 2,500 feet, sparking a second Spindletop oil boom.

Yount went on to acquire mineral rights in several of the Gulf Coast’s major fields. He also built the infrastructure necessary to ship his company’s oil to destinations around the world from his headquarters in Beaumont, Texas.

Before his death in 1933, Yount, his business partners and associates, had built the company into one of the largest and most successful independent oil operators in the country. Within two years, on July 31, 1935, the stockholders sold Yount-Lee Oil Company for $46.2 million to Houston attorney, Wright Francis Morrow, who immediately began to parcel off the assets. Stanolind Oil, later a part of Amoco, bought most of the oil inventory and oil-producing properties for over $41 million, which at the time represented one of the largest financial transactions in American business history.

The Evolution of Standard Oil

At the turn of the 20th century, John D. Rockefeller’s Standard Oil was a force to be reckoned with. In the year 1904, it controlled 91% of oil production and 85% of final sales in the United States.

As a result, an antitrust case was filed against the company in 1906 under the Sherman Antitrust Act, arguing that the company used tactics such as raising prices in areas where it had a monopoly, while price gouging in areas where it still faced competition.

By the time the Standard Oil was broken up in 1911, its market share had eroded to 64%, and there were at least 147 refining companies competing with it in the United States. Meanwhile, John D. Rockefeller had left the company, yet the value of his stock doubled as a result of the split. This made him the world’s richest person at the time.

The company was split into 34 separate entities, mainly based on geographical area. Today, the biggest of these companies form the core of the U.S. oil industry:

– Standard Oil of New Jersey: Merged with Humble Oil and eventually became Exxon

– Standard Oil of New York: Merged with Vacuum Oil, and eventually became Mobil

– Standard Oil of California: Acquired Standard Oil of Kentucky, Texaco, and Unocal, and is now Chevron

– Standard Oil of Indiana: Renamed Amoco, and was acquired by BP

– Standard Oil of Ohio: Acquired by BP

– The Ohio Oil Company: Became Marathon Oil, which eventually also spun-off Marathon Petroleum

But that’s not all – the Standard Oil asset portfolio also carried some other interesting brands that you’d recognize today:

Yes, even Vaseline was originally a part of Standard Oil. Inventor Robert Chesebrough derived the product from petroleum residue, and the spun-off company (Chesebrough Manufacturing Company) was purchased by Unilever in 1987.

Meanwhile, the Union Tank Car Company is a part of Berkshire Hathaway today – and Pennzoil is owned by Royal Dutch Shell.

Friday Snippets

Trump’s Energy Plans Still Hamstrung By EPA, DOI Vacancies

President Donald Trump has made rolling back energy and environmental regulations to boost energy development a priority. But 10 months into his presidency, there are still plenty of vacancies in politically appointed positions at agencies responsible for carrying out the deregulatory push.

Calif. Court Reverses Decision To Allow Crude Oil Shipments

A California state appellate court on Tuesday struck down a controversial decision to allow the construction of a new rail facility that would have allowed greater shipments of potentially explosive oil to be delivered to a shuttered oil refinery in Bakersfield, finding an environmental impact study erroneously downplayed the risk of disaster.

Weatherford exploring sale of some units

US oilfield servicer Weatherford International has reportedly enlisted Morgan Stanley and other advisers to help it divest some units, possibly its artificial lift business, drilling tools and wellheads units and its international pressure pumping business. Weatherford expects the sale to generate about $500 million.

Big Oil companies double down on shale tech, digitalization

In their pursuit of profitability and production growth, oil majors such as Chevron, ConocoPhillips and Royal Dutch Shell are accelerating their shift to automated shale operations in an effort to make the US oil industry more efficient. Companies are experimenting with technologies such as sensors that remotely monitor wells and control well flows, drones with thermal imaging that can detect leaks, devices that can separate frack sand from oil, data analytics and DNA sequencing to identify shale sweet spots.

N.D. breaks own record for number of producing wells

North Dakota’s inventory of producing wells climbed to a record of 14,190 in September, shattering the previous all-time high of 14,089 established in August, according to the North Dakota Industrial Commission. Oil production for September was up slightly to 1.107 million barrels per day, while natural gas output declined to 1.942 billion cubic feet per day.

Shell Midstream Partners acquires assets from parent Shell

Houston-based Shell Midstream Partners is paying $825 million to buy pipelines and other midstream assets from parent company Royal Dutch Shell. The acquired assets include a majority stake in the Mars and Odyssey oil pipelines in the Gulf of Mexico and five terminals in Texas, Washington state, Oregon and Illinois.

Pa. DEP Releases Final Methane Rules For Oil, Gas Drillers

Pennsylvania’s Department of Environmental Protection released final drafts Thursday of regulations aimed at reducing methane emissions from natural gas production, a move that came nearly two years after Gov. Tom Wolf said he wanted to make the state the national leader in curbing leakage of the greenhouse gas.

Breitburn Clears Ch. 11 Hurdle Amidst Creditor Deal

Breitburn Energy Partners LP cleared a major hurdle in its Chapter 11 proceedings on Wednesday after a New York bankruptcy judge approved its disclosure statement and a crucial backstop agreement following an 11th-hour deal with creditors, even as shareholders vowed to continue fighting the contentious plan.

Bakken Shale’s gas production growing faster than oil

Natural gas output in North Dakota’s Bakken Shale is expanding faster than oil output even though the play still produces more oil than gas, according to the Energy Information Administration. Gas production in the Bakken has climbed to a record of 1.94 billion cubic feet per day in August, while oil production is down from a peak of 1.2 million barrels per day three years ago to about 1.07 million barrels per day.

Justice Dept. OKs Weatherford, Schlumberger joint venture

Oilfield services firms Schlumberger and Weatherford International have received permission from the Justice Department to form a North American hydraulic fracturing joint venture. The OneStim joint venture will primarily serve shale oil and natural gas drillers, pitting it against US fracking leader Halliburton.

Hedging activity among US shale drillers grows at unprecedented pace

The volume of oil hedged in the third quarter jumped 147% from the second quarter to 897,000 barrels per day of annualized production, with shale producers securing prices between $50 and $60 per barrel for 2018, according to Wood Mackenzie. “Producers that are able to lock in prices above previous expectations may feel more comfortable with increasing activity,” said Wood Mackenzie research analyst Andy McConn.

November 17, 2017

Chaparral to sell CO2 projects for $170 million

NEWSOK reported that Oklahoma City based Chaparral Energy Inc. announced this week that it has agreed to sell its carbon dioxide-enhanced oil recovery projects in Osage County and the Texas Panhandle for $170 million.

Under terms of the deal, Chaparral could receive additional payments through the end of 2020 if the fields’ future production is sold at a price higher than the buyer’s hedged price.

Reynolds said the company will use proceeds from the sale to repay the company’s $149 million term loan and to pay down its credit facility.

Buying Texas Oil at New Mexico Prices: Majors Go West for Shale

Oil producers discouraged by the rising cost of accessing the vast deposits of the Permian Basin in Texas are sneaking into a geological back door, through neighboring New Mexico.

The state, which covers a smaller part of the oil-soaked shale formation, is the fourth-largest U.S. producer and luring industry giants including Exxon Mobil Corp., Chevron Corp., EOG Resources Inc. and Occidental Petroleum Corp. Their investments — while small compared with Texas — are increasing as activity in the rest of the Permian starts to slow down.

In just the past five months, drilling on the New Mexico side of the Permian expanded 25 percent to 75 rigs, while Texas contracted by 2 percent to 490, according to data compiled by Drilling Info Inc., an Austin-Texas based industry consultant. At the same time, the pipeline network is being expanded, which could mean more sustained growth in development and production.

Oil and gas producer SandRidge Energy said on Wednesday it would buy rival Bonanza Creek in a deal valued at $746 million to expand its presence in the Denver-Julesburg Basin of Colorado.

Bonanza, which emerged from bankruptcy earlier this year, reduced its full-year production forecast for 2017 by 4 percent after a string of quarterly revenue declines. SandRidge emerged from bankruptcy late last year.

The combined entity, SandRidge-Bonanza Creek, will operate over 630,000 net acres in the Rocky Mountains and Mid-Continent regions, producing about 55,000 barrels of oil equivalent per day, the two companies said.

SandRidge is based in Oklahoma and drills in the U.S. Mid-Continent and Niobrara Shale. Bonanza Creek also drills in the Niobrara Shale in Colorado, as well as in Arkansas.

SandRidge said the deal is expected to close in the first quarter of 2018 and will add to its cash flow from the start of the year.

Factoid: PERMIAN BASIN: The Permian Basin is located in West Texas and the adjoining area of southeastern New Mexico. It underlies an area approximately 250 miles wide and 300 miles long and includes the Texas counties of Andrews, Borden, Crane, Dawson, Ector, Gaines, Glasscock, Howard, Loving, Martin, Midland, Pecos, Reeves, Terrell, Upton, Ward, and Winkler.

EIA REPORT SUMMARY

Oil prices dropped on Wednesday after the U.S. government reported an unexpected increase in crude and gasoline stockpiles.

A day after the American Petroleum Institute took the market by surprise reporting a 6.5 million-barrel build in inventories, the Energy Information Administration confirmed inventories had risen last week but by “just” 1.9 million barrels.

Analysts had largely expected a decline in inventories, although a minority were prepared for another weekly build.

The data also showed distillate stocks in the U.S. Gulf fell to a one-year low, while overall refining rates rose in the latest week, led by a jump in East Coast refining, which is operating at a record 99.8 percent of capacity. Increased refining rates could eventually reduce crude inventories.

On Tuesday, the IEA cut its oil demand growth forecast by 100,000 barrels per day (bpd) for both 2017 and 2018. That could mean world oil consumption may not breach 100 million bpd next year as many had expected. Also, supplies are likely to exceed that level, particularly as U.S. production continues to rise.

Oil prices ended lower again on Thursday on increased concerns about growth in U.S. production and inventories, despite expectations that major world producers will extend a supply-cut deal later this month.

Oil prices have slipped from the two-year highs hit last week by both crude benchmarks on signs that U.S. supply is rising and could potentially undermine OPEC’s efforts to tighten the market.

Brent crude oil settled down 51 cents at US$61.36 a barrel, running its streak of losses to five straight days.

US light December crude fell for a fourth consecutive session and was down 17 cents at US$55.35.

NAT GAS NEWS

The NYMEX December natural gas futures contract dipped 2.7 cents Thursday to settle at $3.053/MMBtu, even as the US Energy Information Administration announced a higher-than-expected storage withdrawal.

The EIA estimated an 18 Bcf withdrawal for the week that ended November 10, 4 Bcf larger than the 14 Bcf withdrawal estimated by analysts surveyed by S&P Global Platts.

It was the first withdrawal of the season. Over the past five years, the first storage pull on average came in the week that ended November 17. The week that ended November 10 has averaged a 12 Bcf storage build over the past five years.

The larger-than-expected pull came as temperatures in high-demand areas across the US have been cooler-than-average, increasing heating demand.

Remember when: RANGER, DESDEMONA, AND BRECKENRIDGE OILFIELDS.

Although the Ranger, Desdemona, and Breckenridge oilfields are sometimes considered separately, they are more logically discussed together because of their geographical proximity, times of discovery, and production figures.

On October 21, 1917, the McClesky No. 1 well, at 3,431 feet, a 1,700-barrel producer, opened the Ranger boom. Within a year, Ranger’s population climbed from 1,000 to 30,000, mostly men, and Ranger became a typical oil-boom town.

The Texas Pacific Coal Company (reorganized as the Texas Pacific Coal and Oil Company), had leased most of the field, and as gusher after gusher came in, the territory was subleased at prices as high as $8,000 an acre.

Continental Resources Reports Second International Sale Of Bakken Oil

Oklahoma City based Continental Resources, Inc. (NYSE: CLR) announced this week its second international sale of Bakken crude oil. The Company plans to sell 430,000 barrels of oil (Bo) for January delivery to international markets. The sale transaction will take place in Cushing, Oklahoma.

This follows Continental’s October announcement of the sale of 1,005,000 barrels of Bakken crude oil to Atlantic Trading and Marketing, which intends to export the oil to China.

“International markets are demonstrating accelerated interest in American light sweet oil, and Continental is currently negotiating additional potential sales,” said Harold Hamm, Continental’s Chairman and Chief Executive Officer. “This is the new reality of the United States as a world energy leader.”

In December 2015 the U.S. lifted its ban on oil exports, allowing foreign sales to be transacted without a license. Oil exports have grown steadily in the past two years, primarily to foreign refineries configured specifically to process light sweet crude oil.

Closing Thought: “Give me six hours to chop down a tree and I will spend the first four sharpening the axe.” — Abraham Lincoln

Friday Snippets

US refiners seen ending the year on a high note

Surging fuel demand from Mexico is putting US refineries on track for their best end of the year ever, with nationwide gross oil refinery inputs seen exceeding 17 million barrels per day by the end of December, according to Energy Aspects. Morningstar Director of Research and Commodities Sandy Fielden says US Gulf Coast refiners will continue to favor fuel exports over domestic sales partly because exported barrels are exempt from compliance with the Renewable Fuel Standard.

Oil companies increase drilling activity in Permian Basin

Pioneer Natural Resources, Apache and Occidental Petroleum are among companies increasing their drilling for resources in the Permian Basin in Texas and New Mexico. Pioneer recently added two rigs at its Spraberry-Wolfcamp acreage, Apache plans to add two multi-well pads in the same area and Occidental says it will operate up to seven rigs in its Greater Sand Dunes area early next year.

US oil, gas explorers ramp up hedging amid higher prices

US oil and natural gas producers are rushing to lock in higher prices for their future output as they seek to capitalize on the stronger oil price environment to protect their cash flows. Permian Basin-focused Pioneer Natural Resources hedged an additional 59,000 barrels of oil per day and 83 million cubic feet of natural gas per day in the third quarter, while Hess expanded its hedging program to cover all of its US crude production for the rest of the year.

US Gulf Coast to fortify its position as export hub in coming years

The abundance of inexpensive US oil and natural gas supplies along with heavy investments in export infrastructure will help solidify the US Gulf Coast’s status as an energy export hub for many years, industry consultants said during a conference. “While the US may seem to be retreating geopolitically from the outside world, there has never been a hub like the US Gulf Coast,” Citigroup’s Edward Morse said, predicting it would get even bigger in the future.

ExxonMobil extends lateral lengths in Bakken wells

ExxonMobil recently finished drilling four horizontal wells in North Dakota’s Bakken Shale that boast lateral lengths of three miles, and the company is eyeing the four-mile mark, wrote Barclays analyst Paul Cheng. The longer laterals would be “a game changer that could potentially allow the company to leap frog the competition in unit cost and return metrics,” Cheng added.

Several natural gas producers in the Appalachian region including Range Resources and EQT are drilling longer laterals as a way to improve well efficiency. Range Resources drilled 90% longer laterals in the third quarter and plans to increase the average lateral length to more than 10,000 feet in 2018, and EQT says its acquisition of Rice will help it boost the average length of laterals by 50% from 8,000 feet currently.

Voting Pushed Back As Breitburn Energy Ch. 11 Heats Up

The restructuring of Breitburn Energy Partners LP is headed for a showdown between the debtor and its fed-up shareholders and unsecured creditors, after those groups promised to fight the proposed Chapter 11 plan to the bitter end in a New York bankruptcy court hearing on Tuesday.Obsidian Energy Reaches $8.5M Deal To Settle SEC Suit

Obsidian Energy Ltd., the oil and gas producer formerly known as Penn West Petroleum Ltd., has agreed to pay an $8.5 million civil penalty as part of a deal to resolve the U.S. Securities and Exchange Commission’s allegations of accounting fraud, the agency told a New York federal court Wednesday.GE may seek buyers for Baker Hughes holdings

General Electric Chairman and CEO John Flannery has indicated the company is looking to extricate itself from a recent deal to acquire a majority stake in Baker Hughes. GE could divest its holdings by seeking a single buyer or by selling its stock piecemeal, analysts say.

IEA: US shale boom to last into next decade

The shale boom has positioned the US to become the world’s largest exporter of liquefied natural gas by the middle of the next decade, the International Energy Agency said Tuesday. “A remarkable ability to unlock new resources cost-effectively pushes combined United States oil and gas output to a level 50% higher than any other country has ever managed,” the IEA said.

BHP says hopes to exit U.S. shale business within two years

BHP Billiton said on Thursday it hopes to divest its troubled U.S. onshore shale business in around two years. “We really want to get this done in two years, ideally a bit less,” BHP Chief Executive Andrew Mackenzie said at the company’s annual general meeting.

Cheniere to decide soon on 3rd liquefaction train at Texas facility

Cheniere Energy Director, President and CEO Jack Fusco said he intends to make a final investment decision on a third liquefaction train at the company’s liquefied natural gas export terminal in Corpus Christi, Texas, next year. Cheniere is already building two liquefaction trains at the Corpus Christi facility, and they are scheduled to enter service in 2019.

Anadarko forecasts growth in sales, project spending

Texas oil and natural gas company Anadarko said it expects to see an 11% gain in sales volumes for 2018 to 245 million to 255 million barrels of oil equivalent, an increase on its 2017 forecast of 224 million to 228 million barrels of oil equivalent. Anadarko expects to spend in the range of $4.2 billion to $4.6 billion in 2018, leading to a 14% increase in oil production growth from 2017.

November 10, 2017

ConocoPhillips CEO says oil producers need to gear up for volatility

A Saudi shake-up could keep oil markets volatile – and one of the world’s largest energy companies said it is getting ready.

Ryan Lance, CEO of Houston, Texas-based ConocoPhillips, said his company is readying itself to make profits even if oil prices dip to $40.

“We can sustain our production, pay our dividend, below $40 a barrel,” he said. “That’s part of the transformation that we’ve been through.”

The company sold more than $16 billion in low-margin assets last year, Lance said, in a bid to make the company more resilient. An analysis conducted this summer suggested that U.S. shale producers have an average breakeven price of about $50 for West Texas Intermediate.

Lance, who is also the chairman of the American Petroleum Insitute, made his remarks on CNBC’s “Power Lunch” Wednesday afternoon.

Saudi Crown Prince Mohammed bin Salman bin Abdulaziz said Tuesday that Iran was guilty of “direct military aggression” after Tehran-backed Houthi rebels based in Yemen reportedly fired a missile aimed at Riyadh. The kingdom intercepted the missile.

Analysts have said that the events in Saudi Arabia could lead to a strong decline in oil prices in the longterm even as they push them up in the short run.

Armstrong sells Nanushuk prospect

Armstrong Oil & Gas Inc. has agreed to sell interests in its North Slope find as part of a deal worth up to $850 million.

Australia’s Oil Search Ltd. said Nov. 1 it will purchase interests in the conventional Pikka Unit, Hue Shale and Horseshoe Block from Denver’s Armstrong and GMT Exploration Co. LLC for an initial price of $400 million.

Armstrong is selling half of its interests and Oil Search has an option through June 2019 to purchase the remaining interests from the companies for $450 million.

Under the deal, Oil Search will get a 25.5 percent stake in the Pikka Unit — which is operated by Armstrong and holds the 1.2 billion barrel-plus Nanushuk oil prospect — and a 37.5 percent interest in the “Horseshoe” leases to the south.

Armstrong currently operates the Pikka Unit for its partners Denver-based GMT and Spanish major Repsol. Armstrong is also in the midst of the environmental impact statement process to develop the Nanushuk field, which could produce up to 120,000 barrels of oil per day.

Oil Search will take over as operator of Pikka from Armstrong on June 1, 2018, according to a company release.

Oil-Law Records acquired by Drillinginfo

Drillinginfo Inc., an Austin, Texas-based energy industry software as a service and data analytics company, announced this week that it will purchase Oil-Law Records Corp. Oil-Law Records, a 62-year-old company, will maintain its current location and staff in Oklahoma City.

Oklahoma City-based Oil-Law Records compiles, analyzes and abstracts state-level oil and gas filings and distributes that information to thousands of end users.

“The pairing of these two highly complementary systems clearly demonstrates that the sum is greater than its parts,” said J. Brad McPherson, CEO of Oil-Law Records Corp.

The two companies have worked together for more than 10 years, and the acquisition will allow Oil-Law Records’ data to be provided to customers through Drillinginfo’s technology.

Oil-Law’s “Source” spacing database allows users to tie together historical spacing information up and down geological strata — across geography and across time — to reveal opportunities for well development and in-fill drilling, according to its website.

“Bringing our two resources together reinforces our commitment to meticulously capture data and produce meaningful intelligence. This serves a diverse mix of stakeholders — from landmen to lawyers and planning to permitting teams — and drives efficiencies for those focused on doing more with less, a critical goal of every company in energy right now,” said Jeff Hughes, CEO of Drillinginfo.

Factoid: Why is a Derrick called a Derrick?

Today a noun commonly defined as “a hoisting apparatus employing a tackle rigged at the end of a beam,” or a “framework or tower over a deep drill hole (as of an oil well) for supporting boring tackle,” the word derrick originated in 17th century English sailors’ gallows humor.

Elizabethan sailors hoisting cargo from London’s Thames River docks observed that the process bore a macabre resemblance to the monthly hangings held at Tyburn, about two miles from Newgate prison. The executioner, who served Queen Elizabeth I and King James I, was Thomas Derrick, and his name became associated with dockside loading rigs.

EIA REPORT SUMMARY

U.S. crude oil stockpiles rose unexpectedly last week as imports jumped, exports tumbled and production inched up to its highest since at least 1983, the Energy Information Administration said on Wednesday.

U.S. crude oil production hit an all-time high last week, according to preliminary government data, in another sign of the resilience of American shale drillers.

The United States produced 9.62 million barrels of oil a day in the week through Nov. 3, as reported on Wednesday. That just slightly topped a high struck in June 2015, just before the oil price crash sparked a more than one-year decline that sent U.S. output to about 8.4 million barrels a day.

Key highlights from the EIA’s report’s summary of weekly petroleum data for the week ending November 3, 2017.

> U.S. crude oil refinery inputs averaged 16.3 million barrels per day during the week ending November 3, 2017, 290,000 barrels per day more than the previous week’s average.

> U.S. crude oil imports averaged about 7.4 million barrels per day last week, down by 194,000 barrels per day from the previous week.

> U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 2.2 million barrels from the previous week.

> Total products supplied over the last four-week period averaged over 19.9 million barrels per day, down by 0.8% from the same period last year.

Analysts polled by S&P Platts had forecast a 2.7-million-barrel draw in crude inventories, as well as a 2.25-million-barrel decline in gasoline stockpiles.

OIL AND GAS PRICES

Oklahoma crude oil prices as of 5 p.m. Tuesday:

Oklahoma Sweet: Sunoco Inc. — $53.50

Oklahoma Sour: Sunoco Inc. — $41.50

Oil prices rose nearly 1% on Thursday, supported by supply cuts by major exporters as well as continuing concern about political developments in Saudi Arabia.

Brent crude oil settled up 44 cents at US$63.93 a barrel, still close to Tuesday’s intra-day high of US$64.65, which was the highest since June 2015.

US light December crude was up 36 cents at US$57.17, just shy of this week’s more than two-year high of US$57.69 a barrel.

NAT GAS NEWS

The U.S. Energy Information Administration (EIA) reported Thursday morning that U.S. natural gas stocks increased by 15 billion cubic feet for the week ending November 3. Analysts were expecting a storage injection of around 8 billion cubic feet. The five-year average for the week is an injection of 45 billion cubic feet, and last year’s storage injection for the week totaled 54 billion cubic feet. Natural gas inventories rose by 65 billion cubic feet in the week ending October 20..

U.S. natural gas prices gained ground Thursday, increasing 2.5 cents to $3.20 per million British thermal units,. The 52-week range for natural gas is $2.85 to $3.75.

Remember when: Texas Oil Boom – Clint Murchison

H. Roy Cullen, H. L. Hunt, Sid W. Richardson, and Clint Murchison were the four most influential businessmen during this era. These men became among the wealthiest and most politically powerful in Texas and the nation.

Murchison, who began his career at his father’s bank, soon became an oil lease trader working with Sid Richardson. He expanded into exploration and production in northern Texas, then around San Antonio, and finally the Dallas area. He went on to create the Southern Union Gas Company and became a developer on the East Texas field. He expanded his business into international oil and gas operations in Canada and Australia. His son Clint Jr. went on to form the Dallas Cowboys football franchise. For their part, Murchison and Richardson were known to have been major national political operatives and had close ties to President Dwight D. Eisenhower and his vice president Richard M. Nixon, as well as FBI chief J. Edgar Hoover and President Lyndon B. Johnson.

Noble Energy shedding Denver-Julesburg Basin assets

Noble Energy has agreed to sell off thousands of acres in Colorado’s DJ Basin for $608 million, jettisoning two areas it hadn’t planned to develop for several years.

The Houston oil company will sell 30,200 net acres in Weld County, in so-called non-core areas where it pumps only 4,100 barrels of oil equivalent a day.

About half of the acreage is in an area it named Greely Crescent, and the other half is in the so-called Bronco area of basin. Only 20 percent of the hydrocarbons produced in the area are oil.

It said Wednesday it would close part of the deal, its sale of non-operated acreage, by the end of the year, and it plans to close the sale of land it operates by mid-2018. Noble CEO Gary

Willingham said the company would continue to drill in the northern and eastern parts of the DJ Basin.

“This is where we have a deep inventory of long lateral drilling opportunities in an oilier part of the basin,” Willingham said. Noble will have some 335,000 net acres in the DJ Basin after the deal closes next year.

Closing Thought: “Work hard at your job and you can make a living. Work hard on yourself and you can make a fortune.” — Jim Rohn

Have a great weekend from Oklahoma Minerals!

Talk soon,

Gib Knight

Friday Snippets

Samson Resources adds to its Wyo. position

Samson Resources will acquire 6,700 acres, including 74 wells, in Wyoming’s Converse County from an unnamed non-operating partner. “The acquisition is complementary and accretive to Samson and enhances Samson’s core acreage position in the Hornbuckle area of Converse County while expanding Samson’s presence in the Frontier, Shannon, Niobrara and Mowry plays in the Powder River basin of Wyoming,” said CEO Joseph Mills.

US oil, gas firms signal retreat in drilling activity this winter

US exploration and production activity is seen slowing down this winter despite oil price gains, according to an S&P Global Platts survey of US upstream activity in October. The number of active rigs fell about 1% month-on-month to 1,033 in October, and Platts analyst Trey Cowan anticipates a “continued seasonal flattening of rig activity as the holidays and the exhausting of yearly capital budgets tend to take a toll.”

Trump unveils his pick for top post at EIA

President Donald Trump on Friday nominated Linda Capuano to lead the Energy Information Administration. Capuano is a fellow at Rice University’s Baker Institute for Public Policy and a former Marathon Oil executive.

Return of western Colo. gas-exploration boom unclear

Natural gas explorers are unsure whether a drilling boom will return to western Colorado, where the Piceance Basin contains an estimated 66 trillion cubic feet of recoverable natural gas. Companies are coming up with efficient ways to drill for less money, but working on federal land in Colorado requires lengthy approval periods, and competition has grown in other parts of the country.

Pa. gas production climbs to a record

Pennsylvania producers pumped a record 15 billion cubic feet of natural gas per day in October, up 25% from a year ago and a jump of 80% from January 2013, according to the Energy Information Administration. The production growth is due to an increase in permitting and drilling, with the state Department of Environmental Protection having issued 1,447 permits so far in 2017, up from 1,371 in all of last year, while the daily average number of operating rigs jumped from 20 in 2016 to 33..

Occidental Petroleum to add rigs in New Mexico

Houston-based Occidental Petroleum, which cites strong production at its wells in New Mexico’s Permian Basin, plans to operate up to seven rigs in the Greater Sand Dunes area in next year’s first quarter, an increase from the five there now. The company, which currently has seven active wells in New Mexico, expects to have 26 by the second quarter.

Texas petroleum industry recovery gains momentum

The Texas Alliance of Energy Producers’ Texas Petro Index, which measures the health of the state’s oil industry, rose for the 10th consecutive month in September to 181.4 bolstered by stronger oil prices and surging demand. Oil and natural gas industry employment was up 16.1% year-over-year, crude production for the month rose to more than 103.4 million barrels and the number of original drilling permits issued rose 21% from September 2016 to 903.

US shale firms pledge to boost value while growing production

US shale producers are committed to improving returns for investors and growing production at the same time as a surge in global oil demand and higher prices give drillers a boost. Producers such as Noble Energy, Devon Energy and Pioneer Natural Resources expect to increase their Permian Basin output by at least 10% in the fourth quarter.

Exco Resources may file for bankruptcy protection

Natual gas driller Exco Resources is exploring strategic options, including filing for Chapter 11 bankruptcy protection, as the company said it can’t make its next debt interest payment in December unless it amends its debt agreements or obtains a waiver from lenders.

Strong drilling activity to boost Houston job market in 2018

The Houston area could gain some 70,000 jobs in 2018 if drilling activity across Texas oilfields continues to recover, according to Bill Gilmer, director of the Institute for Regional Forecasting at the University of Houston. However, Gilmer warned of risks that could derail this scenario, such as some producers’ plans to scale back drilling to focus on profits and returns.

November 3, 2017

Earnings Report

Devon Energy Corp. posted a profit of $228 million in the third quarter, the company said Tuesday.

We continue to deliver outstanding well productivity from our U.S. resource plays as we execute on our development plans,” CEO Dave Hager said in a statement. “During the quarter, we had some of the best drill-bit results in Devon’s history with 50 new wells averaging 30-day rates in excess of 2,100 BOE (barrels of oil equivalent) per day.”

The strongest asset-level performance in the quarter was from the company’s STACK assets, where production rose 26% vs. 2016 exit rates.

Also in the third quarter, Devon sold $80 million in assets, boosting its total asset sales this year to $420 million.

Chesapeake averaged 17 wells in the third quarter, drilling 86 wells and completing 120. In the year-ago quarter, the company used 11 rigs to drill 63 wells and complete 80.

Chesapeake now has 14 active rigs, including five in the south Texas Eagle Ford, three in Wyoming’s Powder River Basin, three in the Louisiana’s Haynesville, two in northeast Appalachia and one in Oklahoma. The company said it likely will average 14 rigs in the fourth quarter.

Oklahoma City-based SandRidge Energy Corporation reported a net loss of $8 million, or $0.25 per share, and net cash provided by operating activities of $44 million for the third quarter of 2017, according to a company press release issued Wednesday.

When adjusting reported amounts for items that are typically excluded by the investment community on the basis that such items affect the comparability of results, SandRidge’s adjusted net income amounted to $12 million, or $0.35 per share, and operating cash flow totaled $46 million. Earnings before interest, income taxes, depreciation, depletion, and amortization, adjusted for certain other items for the third quarter was $42 million.

DOJ ends probe of Chesapeake’s mineral royalty practices

The U.S. Department of Justice ended a three-year probe of Chesapeake Energy Corp’s (CHK) royalty payment and land purchase practices without taking action, the natural gas producer said in a securities filing on Thursday.

The department subpoenaed documents from the company in 2014 after dozens of landowners and others accused it of short-changing them on royalties for natural gas and other fuels.

Chesapeake said in the filing with the U.S. Securities and Exchange Commission that the Justice Department advised it on Sept. 19 that it had concluded the probes. The company remains in discussions with the U.S. Postal Service and various states, which separately sought information about the practices, the filing said.

Last month, a U.S. District Court in Akron, Ohio, lent support to the company’s royalty deductions on contracts in the state, dismissing a lawsuit by landowners and others saying Chesapeake should not have charged post-production costs against payments to them. The ruling halted a number of cases against Chesapeake but left others intact.

Rosehill Resources buys Delaware Basin acreage for $77M

Rosehill Resources (NASDAQ:ROSE) agrees to acquire as much as 9,100 net undeveloped acres and certain producing oil and gas properties in the Delaware Basin from an unnamed seller for $77.6M. The acreage is located in northwestern Pecos County, Texas.

The deal includes an option for ROSE to buy an additional 4,535 net acres at the same acreage price—an estimated $16,600 per acre.

The acquisition, which also includes producing properties with limited production of 40 barrels of oil equivalent per day (boe/d), will establish a second core operating area in the Delaware Basin to Rosehill’s current position in Loving and Reeves counties, Texas, and Lea County, N.M.

In August, J.A. (Alan) Townsend, Rosehill’s president and CEO, told attendees at the Summer NAPE business conference in Houston that the company expected to be “aggressive” in its pursuit of additions to its position in the Delaware Basin.

Despite heavy A&D competition in the basin, Townsend said the company is aiming for more than 20,000 acres by the next couple of years. “The size of our current acreage position of about 5,000 acres we think puts us in a position to be a bit of an aggregator,” he said.

ROSE is currently evaluating several potential sources of financing for its Pecos acquisition including preferred equity, debt or a combination of both, according to the release. The company said it expects to close the transaction in fourth-quarter 2017.

Factoid: Dual Cone Roller Bits Patented By Howard Hughes Sr., in 1909

“Fishtail” drill bits became obsolete after Howard Hughes Sr. of Houston, Texas, patented the dual-cone roller bit consisting of two rotating cones. By pulverizing hard rock, his bit led to faster and deeper rotary drilling.

EIA REPORT SUMMARY

After a reported large draw in crude, distillates and gasoline from the American Petroleum Institute (“API”) after the closing bell Tuesday night, the EIA report Wednesday morning was somewhat muted. The data though wasn’t entirely negative, but the expectations for a “monstrous” draw turned into a “large” draw in reality.

The EIA’s Weekly Petroleum Status Report for the week-ended Oct. 27 detailed a less-than-expected 2.4 million bbl stock draw for crude oil, and showed gasoline stocks declined by a more-than-expected 4.0 million bbl. Distillate supply fell by a less-than-expected 320,000 bbl during the week reviewed.

“The demand is a bit bearish and combined with US oil production certainly tempers overall bullishness of the stock changes,” said analyst Kyle Cooper at IAF Advisors in Houston.

Aside from weekly U.S. oil supply data, the futures complex has been supported in the past several weeks by a bullish psychology driven by expectations that the Organization of the Petroleum Exporting Countries and their 10 allied nonmember producers would extend its agreement to cut crude production by 1.8 million bpd through December 2018 instead of allowing it to expire at the end of March 2018. The cuts have been in place since January.

Oil prices are at their highest since the start of the year, after rising above the key $50-a-barrel mark in September and holding those gains. Rather than pure speculation, this move is rooted in fundamentals: falling inventories and increasing demand.

Oil prices set another new six-month high Thursday, continuing a steady rise even as U.S. production approaches record levels.

The U.S. Energy Information Administration (EIA) reported Thursday morning that U.S. natural gas stocks increased by 65 billion cubic feet for the week ending October 27. Analysts were expecting a storage injection of between 60 billion and 70 billion cubic feet. The five-year average for the week is an injection of 60 billion cubic feet, and last year’s storage injection for the week totaled 54 billion cubic feet.

Last week marked the end of the EIA’s official natural gas injection season. From now until April is the withdrawal season, when stocks are drawn down to provide winter heating. About half of all U.S. homes are heated with natural gas.

H. Roy Cullen, H. L. Hunt, Sid W. Richardson, and Clint Murchison were the four most influential businessmen during this era. These men became among the wealthiest and most politically powerful in Texas and the nation.

A native of Athens in east Texas, Richardson attended Baylor University and Simmons College from 1910 to 1912. With borrowed money, he and a business partner, Clint Murchison, Sr., amassed $1 million in the oil business in 1919-1920, but then watched their fortunes wane with the oil market, until business again boomed in 1933.

Richardson was a cattle trader who established an independent oil production business in Fort Worth in 1919. He soon expanded into numerous businesses and owned the Texas City Refining Company, cattle ranches, radio and television networks, among other businesses. He was a very private man who was sometimes referred to as the “bachelor billionaire.”

He began ranching in the 1930s and developed a love of Western art, particularly that of Frederic Remington and Charles M. Russell. He built one of the largest private collections of these artists’ work, which opened to the public as the Sid Richardson Collection of Western Art in 1982. After a yearlong renovation, it reopened as the Sid Richardson Museum in 2006.

Next week: Clint Murchison

More competitive U.S. oil and gas lending drives down pricing

A renewed willingness to lend to US oil and gas companies, as oil prices stabilize well above lows, is driving down pricing for borrowers after two straight years of steep increases.

The volume of credit lines provided to exploration and production companies, using their oil and gas reserves as collateral, so far this year has already topped full-year 2016, although it is a shadow of the 2014-2015 tallies reached before oil and gas prices tanked, according to Thomson Reuters LPC.

While some banks have left the industry, those remaining are chasing relatively low lending volumes, leading to pricing competition on the smaller pool of loans.

“There’s more capital coming back to the market,” said one industry source. “For some of these banks, including JP Morgan, Wells Fargo, Bank of Oklahoma and Texas Capital, oil and gas lending was one of the pillars of their business and they’re getting back to it.”

Closing Thought: “If you have everything under control, you’re not moving fast enough.”

-Mario Andretti

Have a great weekend from Oklahoma Minerals!

Talk soon,
Gib Knight

Friday Snippets

Senate Advances Budget Bill Effecting Arctic Drilling

The Senate voted this month to advance a budget bill that sets instructions for drilling in the Arctic National Wildlife Refuge. Over the last 30 years, Congress has voted nearly 50 times on whether or not to drill in the refuge.

Rising US crude exports strain infrastructure

The US oil export boom will soon reveal to what extent the nation’s infrastructure, such as pipelines, storage and loading capacity and shipping traffic, can handle the surging volumes of US crude flowing overseas. It’s unclear how much crude the US can export now, but analysts say exports will start hitting bottlenecks if they climb to 3.5 million to 4 million barrels per day, potentially weighing on US oil prices.

Representatives from 10 US energy companies, including Cheniere Energy and Freepoint Commodities, will travel to China next month as part of Commerce Secretary Wilbur Ross’ delegation. Their mission is to persuade Chinese buyers to sign liquefied natural gas supply contracts, but American LNG exporters will first have to prove that their prices can compete with those charged by rivals Australia, Qatar and Malaysia.

WTI should replace Brent as global benchmark, executive says

Dan Eberhart, the CEO of Denver-based drilling services company Canary, says West Texas Intermediate should be the global benchmark for oil prices, arguing that “the logic for why [Brent] was the benchmark has really eroded significantly in the last five years.” Eberhart says the one thing that prevented WTI from becoming the global benchmark was the decades-long ban on crude oil exports, but with those restrictions now lifted, making WTI the global benchmark would be a logical move that would lead to more investments in the US.

Commentary: Charts suggest oil prices could surge

Bruce Kamich, CMT, explains how oil charts indicate an increase in prices is likely. “Crude oil futures might be extended on the upside, and we could see a sideways or even a lower correction, but the longer-term picture in the weekly chart suggests a base pattern that is capable of propelling prices a lot higher,” Kamich writes.

QEP Resources divesting non-core assets

QEP Resources is shedding non-core properties in the Permian Basin’s Central Basin Platform, Utah and Wyoming in deals worth a combined $34.5 million. QEP might divest other non-core upstream and midstream assets in the Permian Basin as the company increases its focus on its core position in the region.

Number of US oil, gas deals rises, but value shrinks

US oil and natural gas companies struck 53 deals worth at least $50 million in the third quarter, marking a 13% increase from the same period last year, although their combined value fell 58% year-over-year to $23.6 billion, according to a PricewaterhouseCoopers report. Only seven deals worth $1 billion or more were announced in the quarter as shale drillers shifted their focus to smaller land deals, mostly beyond the Permian Basin.

Arctic refuge lease sales likely to fall well short of $1B target

Senate Republicans’ plan to raise $1 billion from selling drilling rights in the Arctic National Wildlife Refuge looks destined to fail since oil prices would need to be around $70 per barrel to make sense for producers to drill in the region. Based on previous Arctic lease sales, the government should be able to generate only about $145.5 million over the next 10 years from auctioning off land in ANWR.

ExxonMobil agrees to $300M in safety upgrades in settlement

ExxonMobil has agreed to pay a $2.5 million civil penalty as well as invest almost $300 million to upgrade its air pollution monitoring systems to settle claims that it violated the Clean Air Act. PDC Energy will also pay a $2.5 million penalty, as well as invest $18 million in systems upgrades and $1.7 million for the mitigation of other issues.

Elevate Midstream Partners attracts up to $100M investment

Tailwater Capital has committed up to $100 million to Houston-based Elevate Midstream Partners, a new midstream service provider to onshore oil and natural gas producers. The Elevate investment is the first of several energy deals Tailwater is expected to announce in the coming month.

Gas output in Haynesville Shale hits multiyear high

The Haynesville Shale saw its marketed natural gas production climb to 6.9 billion cubic feet per day in September, the highest level since 2013, helped by a surge in the number of active drilling rigs and improved well production rates, according to the Energy Information Administration. The region has produced an average of 6 billion cubic feet per day in the past three years, down from a peak of 10.4 billion cubic feet per day in November 2011.

American Midstream to acquire fellow Texas firm

Pipeline company American Midstream Partners, based in Houston, will buy Southcross Energy Partners, based in Dallas, in a deal valued at $815 million including debt. The acquisition will help American Midstream expand its natural gas pipeline network along the Gulf Coast and in southern Texas.

October 27, 2017

ONEOK, the midstream giant plans to expand one of its joint ventures

ONEOK and Martin Midstream Partners announced this week that they would invest about $200 million in expanding their natural gas liquids (NGL) system into the Delaware Basin side of the Permian Basin. ONEOK will shoulder the lion’s share of this investment since it owns an 80% stake in the West Texas LPG joint venture, with Martin Midstream holding the other 20% interest.

The partners plan to construct 120 miles of new pipeline that will have 110,000 barrels per day of initial capacity. Further, they plan on building two new pump stations and pipeline looping along the existing West Texas LPG system to handle the incremental volumes. Supporting the project is long-term dedicated NGL production from two planned third-party natural-gas processing plants in the Delaware Basin, which should produce 40,000 barrels per day.

This project should enter service in the third quarter of next year. Further, it could be just the first of many, since the Delaware Basin is one of the fastest growing shale plays in the country. As such, ONEOK’s CEO Terry Spencer stated that this extension of the West Texas LPG system into that region positions it for “significant future NGL volume growth.”

USGS: Three small earthquakes rattle Oklahoma

The U.S Geological Survey reports three small earthquakes in Oklahoma.

The two largest quakes each have a preliminary magnitude of 3.1. The first was recorded at 8:50 p.m. Tuesday near Woodward, about 150 miles northwest of Oklahoma City. The second struck at 10:17 a.m. Wednesday near Enid, 56 miles north of Oklahoma City.

The third temblor was a preliminary magnitude 2.5 quake at 6:05 a.m. Wednesday near McLoud, on the eastern edge of the Oklahoma City.

No injuries or damage have been reported.

ExxonMobil Acquires Permian Basin Crude Oil Terminal in Wink, Texas

Irving, Texas-based ExxonMobil has acquired a crude oil terminal in Wink, Texas from Genesis Energy LP, according to a company press release issued on Wednesday.

The terminal is located in the rapidly growing Delaware Basin, part of the Permian Basin – one of the most prolific plays in the United States.

The terminal is strategically positioned to handle Permian Basin crude oil and condensate for transport to Gulf Coast refineries and marine export terminals. The facility is interconnected to the Plains Alpha Crude Connector pipeline system, and is permitted for 100,000 barrels per day of throughput with the ability to expand.

This acquisition marks ExxonMobil’s first terminal in the Permian Basin to be anchored by the corporation’s newly acquired Delaware Basin acreage, previously announced in January.

Factoid: Cable-Tool Rigs

Oil well drilling technology has evolved from the ancient spring pole to percussion cable-tools to the modern rotary rigs that can drill miles into the earth. The record depth recorded for a cable-tool rig is 11,145 feet.

EIA REPORT SUMMARY

Data from the U.S. Energy Information Administration Wednesday showed that domestic crude supplies rose by 900,000 barrels for the week ended Oct. 20. That contradicted the forecast for a decline of 425,000 barrels by analysts surveyed by S&P Global Platts. The American Petroleum Institute on Tuesday reported a 519,000-barrel climb. Gasoline stockpiles dropped by 5.5 million barrels for the week, while distillate stockpiles fell 5.2 million barrels, according to the EIA. The S&P Global Platts survey forecast drops of 2.3 million barrels for gasoline and nearly 2.1 million barrels for distillates.

Since the beginning of the year, U.S. crude oil inventories have dropped by 23 million barrels. To the same point in 2016, inventories had risen by 19 million barrels. Over the past 10 years, the average for the first nine months of a year is an addition of 24 million barrels to the nation’s stockpile of crude.

With U.S. rig counts continuing to decline and demand slightly higher, it seems reasonable to expect U.S. inventories to fall further and for crude prices to rise. The fly in the ointment may be exports that have boomed as WTI continues to trade at around a $6 per barrel discount to Brent. As long as producers can get their crude to the Gulf or East Coast and still make a profit, exports will act as a counterweight to higher prices.

U.S. oil ends higher, as international benchmark hits more than 2-year peak

Brent Crude Settles Close to $60 as WTI Climbs Above $52 a Barrel

U.S. oil futures climbed to the highest level since mid April on Thursday, with global benchmark Brent crude settling at its highest since July 2015.

December Brent crude oil settled up 86 cents, to $59.30 a barrel. That marked the highest finish for a front-month contract since July 3, 2015, according to data from Dow Jones.

The U.S. light crude December contract CLZ17 ended up 46 cents, to $52.64 a barrel, the highest finish since April 17.

A report from The Wall Street Journal Wednesday, citing people familiar with the matter, said Saudi Arabia and Russia, the world’s two largest producers of crude oil, want to extend the output-cut deal through the end of next year. Bloomberg on Thursday reported that Saudi Arabian Crown Prince Mohammed bin Salman backed the deal’s extension beyond march 2018, when it’s currently set to expire.

November natural gas NGX17, which expires at Friday’s settlement, fell 1% to $2.89 per million British thermal units.

Remember when: Texas Oil Boom – Haroldson Lafayette “H. L.” Hunt Jr.

H. Roy Cullen, H. L. Hunt, Sid W. Richardson, and Clint Murchison were the four most influential businessmen during this era. These men became among the wealthiest and most politically powerful in Texas and the nation.

Hunt’s first successes were in the oilfields of Arkansas, but he lost most of his fortune by the outset of the Depression as overproduction depleted his fields and his speculation on land and oil drained his resources.

By trading poker winnings for oil rights, he ultimately secured title from Dad Joiner to much of the East Texas Oil Field, one of the world’s largest oil deposits.

From it and his other acquisitions, he accrued a fortune that was among the world’s largest; at the time of his death, he was reputed to have the highest net worth of any individual in the world. His personal life, which featured many children by three wives, was among the chief inspirations for the television series Dallas, whose most famous character J. R. Ewing was largely based on popular perceptions of Hunt.

Next week: Sid Richardson

Oklahoma soon may be 3rd in oil production

Oklahoma soon will be third in the nation among oil-producing states, an economist predicted during Enid Regional Development Alliance’s quarterly luncheon Thursday.

Mark Snead, president and economist at RegionTrack, spoke about the economic role of oil and gas in Oklahoma currently and in the future.

“We are looking for record production level, in terms of crude oil … sometime in the next six months,” he said. “All-time production highs in Oklahoma. We aren’t really looking for substantial gains in natural gas. In fact, we’re probably assuming flat production to maybe slightly upward production for many years. It’s just an overwhelming supply issue.”

Of the top producing oil states, Oklahoma now is fifth.

“We’re probably going to be third pretty soon because Alaska and California both are steadily diminishing,” Snead said. “Once Oklahoma gets ramped up again, and we start drilling aggressively for crude, you’re likely going to see us pass both California and Alaska.”

On the natural gas side, Oklahoma is third in production but is way behind Pennsylvania and Texas.

“In fact, Pennsylvania’s probably going to pass Texas sometime in the next 12 to 18 months, we would argue,” he said.

Closing Thought: ” Success is not owned. It’s leased and rent is due every day.”

— JJ Watt

Have a great weekend from Oklahoma Minerals!
Gib Knight

Friday Snippets

US demand for petroleum products at 10-year high

Demand for petroleum products climbed 2.4% year-on-year to over 20.2 million barrels per day last month, marking the highest level of demand for the month of September in a decade, according to the American Petroleum Institute. Gasoline deliveries were down 0.8% from a year ago to 9.4 million barrels per day, while distillate deliveries rose 3.4% to over 4 million barrels per day.

US Midwest refiners becoming more self-sufficient

Heavy investments in capacity expansions and the availability of cheap crude have boosted refining output in the Midwest to a record 4.06 million barrels of crude per day in recent months, helping the Midwest region reduce its reliance on the Gulf Coast. In the early 2000s, the Gulf Coast would deliver about 3.4 million barrels of crude and refined products per day to the Midwest, but that figure fell by 50% in 2016.

Shareholder returns more important than growth for US drillers

The declining number of US rigs and muted quarterly earnings reported by Schlumberger and Baker Hughes serve as evidence that US shale drillers are finally abandoning production growth in favor of improving profits and shareholder returns. The rig count across US shale plays has fallen by over 30 since mid-August, including a decline of six rigs in the Permian Basin last week — the biggest drop in the region since March 2016.

Tellurian unveils new business model

US liquefied natural gas developer Tellurian is putting up for grabs a 60% to 75% equity stake in Driftwood Holdings, which controls Tellurian’s upstream business, pipeline and LNG export terminal. The equity stake comes with an offtake capacity of 1 million metric tons for $1.5 billion payable over a four-year period, which Vice Chairman Martin Houston said means investors could deliver LNG at even cheaper prices than Tellurian had promised previously this year.

Hess Sells Norwegian Subsidiary To BP Unit In $2B Deal

Hess Corp. said Tuesday it will sell off its Norwegian oil and gas interests to an exploration and production company owned by BP PLC and investment company Aker ASA in a $2 billion deal, as Hess continues to reshuffle its assets.

Energy executive sees slowing gas production in Appalachian Basin

As they drill longer laterals, natural-gas producers in the Appalachian Basin will eventually run into “sweet spot exhaustion,” causing per-well productivity to decline as drillers are forced to turn to lower expanses, according to Range Resources Senior Vice President Alan Farquharson. “They think technology can make tier-one acreage core acreage, but it can’t,” he said.

Oil sands output growth to lose impetus amid project downsizing

Growth in Canadian oil sands production is expected to decline by more than half from 250,000 barrels per day in 2018 to 120,000 barrels per day in 2019 as the era of mega-projects comes to an end, according to consultancy ESAI Energy. The current oil price environment makes it unlikely that any new greenfield oil sands projects will be built before 2020, ESAI said.

Halliburton braces for weaker 4th quarter amid US rig count declines

A slowdown in rig count growth across the US could affect Halliburton’s oil well drilling and evaluation business this quarter, the oilfield services giant warned on Monday. “[Halliburton’s] commentary about rig counts driving near-term growth creates some level of uncertainty regarding whether they will be able to meet Q4 estimates,” Edward Jones senior analyst Brian Youngberg said.

The labor deficit and lack of hydraulic equipment in the West Texas oil patch are costing oilfield service providers thousands of dollars per day and threaten to derail the industry recovery as thousands of wells are left dormant. Companies such as Halliburton are raising wages and offering housing to attract workers from other states, but analysts warn these efforts will result in higher labor costs that affect companies’ profitability.

Occidental Owes Repsol $65M In NJ River Cleanup Saga

A New Jersey judge has ordered Occidental Chemical Corp. to pay Spanish oil giant Repsol SA $65 million to cover its settlement with state environmental regulators over the cleanup of decades-old pollution in the Passaic River, ending the companies’ 12-year court battle.

October 20, 2017

Oklahoma City-based Continental Resources to export oil to China

Oklahoma City based exploration and production company Continental Resources, Inc., recently reported that it has sold crude oil from Bakken for the first time. More than 1 million barrels of crudes were sold to Houston, TX-based trading and shipping company, Atlantic Trading and Marketing (“ATMI”) for November deliveries. ATMI is expected to deliver the oil overseas to the Chinese.

“This is significant for Continental Resources and U.S. producers that we are able to make this happen,” CEO Harold Hamm told The Oklahoman on Tuesday.

Hamm helped lead the effort to repeal the country’s 40-year-old crude oil export ban. Then-President Barack Obama lifted the ban in late 2015. Since then, China changed its internal rules, allowing the country’s oil companies to import U.S. oil.

The sale of the oil that will ultimately reach China is in line with the company’s long-term strategy of securing different international markets for its light sweet oil. Per the company, the American shale energy revolution has supported the sale of 1,005,000 barrels overseas through ATMI.

Jones Energy and The Company’s Transformation

Jones Energy CEO Jonny Jones described his company’s transformation from a small private entity to a publicly traded company in a talk on 11 October at the Leaders in Industry Luncheon, sponsored by the Independent Producers Association of America and the Texas Independent Oil Producers, at the Houston Petroleum Club.

Jones highlighted the presentation with a discussion of the company’s entry into the Merge oil play, a newly defined play at the junction of the SCOOP and STACK plays in central Oklahoma.

Oil runs deep in the Jones family. Jones’ father and grandfather were independent oil drillers. Jonny Jones established Jones Energy in Oklahoma City in 1988 and relocated to Austin, Texas, in 1993. Focused on field development in Oklahoma and Texas, the privately held company sold significant assets to directly benefit its shareholders on three separate occasions during its first 2 decades of operation.

With the sale of its acreage in the Arkoma Basin 2 months ago, Jones Energy has directed its attention squarely toward the Merge play.

The company has 21,000 net acres with seven wells producing 2,000 BOE/D from zones in the Woodford and Meramec. A two-rig drilling program will be expanded to six rigs next year. Jones believes that his company’s costs per well are 20% to 30% lower than those of competitors. The company recently completed its first 10,000-ft lateral.

OKEnergy Today is reporting that Denver-based Cimarex Energy intends to stay busy in Oklahoma’s STACK after filing and receiving 9 permits to drill at one site.

The 9 variations of the Vince wells, located at 26 11N 8W are about four miles west of Union City. It’s there the company will explore the Mississippian, Woodford and Hunton zones.

The permits, as shown on OK Energy Today’s listing of well permits were all in Canadian county, one of the three primary counties making up the STACK.

Cimarex describes itself as a “leading exploration and production company with operations in Texas, Oklahoma and New Mexico.” The company website indicated it invested $735 million in exploration and development activities in the Permian and Mid-Continent in 2016 and plans to invest up to $1.2 billion in the same areas this year.

Factoid: Oklahoma Oilfield Camps

A typical oil-company camp built by a major operator might contain a dozen or even more than one hundred houses. These were usually identical three-room or four-room buildings painted in company colors and arranged in neat rows. Employees paid a small fee, less than ten dollars per month, to offset the cost of utilities, garbage collection, and general maintenance. A larger camp was a self-contained community with baseball teams, club activities, and company-maintained parks, and some even had their own schools. The independents generally could not afford to build large camps, but they provided certain workers with “lease houses.” These were similar to camp houses, but usually there was usually only one to a lease, and in it the “pumper” (the man who maintained that lease) lived with his family. Until the late 1940s the oil fields were dotted with lease houses along with the occasional camp.

EIA REPORT SUMMARY

Data from the U.S. Energy Information Administration Wednesday showed that domestic crude supplies fell by 5.7 million barrels for the week ended Oct. 13. That was higher than the forecast for a drop of 3.9 million barrels by analysts surveyed by S&P Global Platts, but below the 7.1 million-barrel decline reported by the American Petroleum Institute late Tuesday. Gasoline stockpiles were up 900,000 barrels for the week, while distillate stockpiles rose by 500,000 barrels, according to the EIA. The S&P Global Platts survey forecast drops of 340,000 barrels for gasoline and 2 million barrels for distillates.

Oil prices fell more than 1 percent on Thursday, breaking four days of gains, pressured by larger-than-expected product inventories in the United States and profit-taking after a recent run-up in markets.

Brent crude oil settled down 92 cents, to $57.23 a barrel. The global benchmark is still about 30 percent above its mid-year levels.

The U.S. light crude December contract CLZ17 ended down 75 cents, to $51.51 a barrel, but is still nearly 25 percent higher than June’s lows.

NAT GAS NEWS

Expect Higher Natural Gas Prices This Winter

Seasonally natural gas has been increasing into the end of October, but currently prices are correcting. Trading has been influenced by the EIA update on supply and demand, released on Oct. 11.

In its “Winter Fuels” October forecast released on Oct. 11, the U.S. Energy Administration, or EIA, forecast an increase in consumer gas prices this winter due to cold weather and increasing gas costs, with an emphasis on colder weather. Consumption is likely to rise.

EIA forecasts that average household expenditures for all major home heating fuels will rise this winter because of expected colder weather and higher energy costs. Average increases vary by fuel, with natural gas expenditures forecast to rise by 12%, home heating oil by 17%, electricity by 8%, and propane by 18%. Most of the increase reflects expected colder weather rather than higher energy costs. A warmer-than-forecast winter would see lower increases in expenditures, and a colder-than-forecast winter would see higher increases in expenditures

November natural gas NGX17, closed Thursday at $2.873 per million British thermal units.

Remember when: Texas Oil Boom – H. Roy Cullen

H. Roy Cullen, H. L. Hunt, Sid W. Richardson, and Clint Murchison were the four most influential businessmen during this era. These men became among the wealthiest and most politically powerful in the state and the nation.

Cullen was a self-educated cotton and real-estate businessman who moved to Houston in 1918 and soon began oil prospecting. Cullen’s success led to his founding the South Texas Petroleum Company and Quintana Oil Company. Cullen and his wife established the Cullen Foundation, which became one of the largest charitable organizations in the state, and donated heavily to the University of Houston, the Texas Medical Center, and numerous other causes in Texas, particularly in the Houston area.

Next week: H. L. Hunt

FIG Tree Capital Ventures Announces Another Successful Well In The Oklahoma STACK

FIG Tree Capital Ventures, a Texas based venture capital firm, with projects in the Oklahoma STACK and SCOOP, the Williston Basin (Bakken/Three Forks Shale) of North Dakota, and The Woodbine Eaglebine Formations of South East Texas, recently announced a newly completed well with huge initial production. FIG Tree partnered with Chesapeake Energy to drill the Bradford 5-18-5 to the Oswego Formation in Kingfisher County Oklahoma. The well reached an initial 24-hour production rate of 1,130 bbls of oil and 3,677 mcf of gas. Although FIG Tree and its partners have been successfully targeting the Woodford and
Meramec Formations in the Oklahoma STACK and SCOOP for some time, the Bradford well is the first time the company has participated in the Oswego Lime.

FIG Tree specializes in identifying and acquiring non-operated acreage positions in the core areas of the nation’s most prolific unconventional resource plays like the STACK and SCOOP. Since first entering the STACK and SCOOP several years ago, FIG Tree and its partners have acquired interest in 17 wells across Grady County, Kingfisher County, Canadian County, and Custer County with plans for more. According to Richard Main, the company President, “It’s our opinion that the STACK and SCOOP will remain the most economic acquisition targets for the foreseeable future.

Closing Thought: “Successful people do what unsuccessful people are not willing to do. Don’t wish it were easier; wish you were better.”
— Jim Rohn

Have a great weekend from Oklahoma Minerals!
Gib Knight

Friday Snippets

Alta Mesa Agrees To Pay $4.57M To Settle Gas Royalty Row

A putative class of royalty owners asked an Oklahoma federal judge on Wednesday to approve a settlement agreement that would require gas producer Alta Mesa to pay $4.57 million to end claims it underpaid royalties on gas wells in the state by taking improper deductions.

Wave of US oil exports to swell in coming weeks, Mercuria says

Marco Dunand, CEO of trading house Mercuria, expects US oil exports to reach “unprecedented” levels in the next two or three weeks as excess US crude supplies fuel the export boom. Dunand told the Reuters Global Commodities Summit that the volume of US oil headed overseas could hit 2.2 million barrels per day over the next month.

IEA: Oil market re-balance might have to wait

The International Energy Agency’s monthly report estimates global supply may continue to exceed demand next year, essentially capping oil prices for 2018 and slowing the move toward rebalancing. “According to the IEA’s calculation, at the current level of OPEC production there will be no global stock draws next year,” said Petromatrix’s Olivier Jakob.

Permian pipeline operators step up consolidation efforts

Concerns that Permian Basin oil production won’t grow fast enough to fill the new pipeline space becoming available in Texas have prompted operators of the roughly 20 new pipelines planned for the region to sell stakes in the projects and start chasing supply deals. If all of these projects come online, the Permian’s pipeline capacity would more than double from 2.4 million barrels per day now, whereas current production volumes hover around 2.6 million barrels of oil per day.

Riding the wave of the LNG export boom with Cheniere Energy

In the past year and a half, Cheniere Energy has become a symbol of US liquefied natural gas export growth, but business was not always booming for the company, which once had $2 billion in debt and just $50 million cash on hand and was trading below $3 per share. Cheniere’s Sabine Pass facility originally served as an import terminal, but when the company’s then-CEO Charif Souki realized that the large amount of cheap natural gas produced by the US shale revolution had to be shipped overseas, he struck supply deals with foreign companies including Britain’s BG Group, marking the start of a new chapter for Cheniere.

Shell’s $5M Spill Settlement A ‘Slap In The Face,’ Court Told

Residents of an Illinois village allegedly contaminated by benzene spills from the Wood River Refinery have raised objections to a proposed $5 million settlement that would end a class action against refinery operator Shell Oil in Illinois federal court, calling the deal a “slap in the face.”

Preferred Sands planning new sand mine in Texas

Pennsylvania-based frac sand miner Preferred Sands has acquired over 4,000 acres in Texas’ Atascosa and Bexar counties, where it plans to start construction on a sand mine by the end of the year. The mine will serve drillers in the Eagle Ford Shale play.

ExxonMobil has bought a crude oil terminal in the Delaware Basin from Genesis Energy for an undisclosed amount. The terminal, with a capacity of 100,000 barrels per day and the ability to expand, will serve Exxon and other producers.

BHP begins drilling Gulf of Mexico wildcat well

BHP has started drilling a wildcat well in the US Gulf of Mexico’s Green Canyon area at a depth of 1,257 meters. The Australia-based company, which is using the drillship Deepwater Invictus, expects results from drilling at the Scimitar wildcat in March.

Drillers return to Haynesville Shale in La., Texas

Natural gas drillers are refocusing their efforts on the Haynesville Shale field in northwest Louisiana and eastern Texas as companies learn to extract more gas from wells at lower cost by using technology such as long lateral wells. The number of rigs has more than tripled in the field in the past year, and gas production has increased by over 20%.

Permian land rush running out of steam, Encana CEO says

US drillers are starting to retreat from the Permian Basin land race amid mounting investor pressure to prioritize profitability over production growth, according to Encana President and CEO Doug Suttles. Encana’s cash flow is expected to grow at an annual rate of 25% through 2022, helped by efficient production techniques and lower costs.

October 13, 2017

More U.S. oil hitting the global market

Platts points to the growing spread between U.S. crude oil and rival grades as an incentive for more exports.

A 40-year-old ban on U.S. crude oil exports ended in the waning years of President Obama’s tenure. During his term, Republican lawmakers helped broker an end to the ban enacted in the 1970s in response to an oil embargo embraced by some members of the Organization of Petroleum Exporting Countries.

The Commerce Department had allowed some exports of domestically-sourced condensate, an ultra-light form of oil found in many U.S. shale basins. If processed in a certain way, condensate does not meet the federal classification of crude oil.

As a result, a recent report from Bank of America-Merrill Lynch said the spread, or difference, between West Texas Intermediate, the U.S. benchmark for the price of oil, and Brent, the global benchmark, made U.S. crude competitive on the open market.

“This massive outflow of U.S. crude isn’t surprising in light of the shifting economics that has provided a strong incentive for exports,” the report read.

Brent held a nearly $6 per barrel premium against WTI at the close of Tuesday. Of all the major traded grades for crude oil, only Western Canadian Select, the Canadian benchmark, is cheaper than U.S. crude. That means WTI could be displacing major grades like Dubai, the Middle East benchmark, in some Asian economies.

Permian Hot Deals Meet The Market’s Cold Shoulder

Buying a ticket to Permian Basin production—already an expensive proposition last year—now carries an additional surcharge in 2017—investors’ ire.

Producers spent nearly $27 billion in the Permian from April 2016 through July 2017, according to Moody’s Investors Service. E&Ps have primarily targeted the Midland Basin’s Martin, Glasscock, Howard and Reagan counties and the Delaware Basin’s Reeves, Pecos and Ward counties in West Texas.

In 2016, a Delaware deal could seemingly do no wrong, Robert Clarke, Wood Mackenzie’s research director for Lower 48 upstream, said at Hart Energy’s recent DUG Midcontinent Conference & Exhibition. E&P stocks generally saw a lift as high as 4% the day after a deal announcement.

“There seems to be a mood change now,” Clarke said. “Transactions no longer lift stocks. Now that’s dropped to a negative.”

Apache Corp. has scouted out Alpine High, a region in West Texas where it discovered a large bounty of oil last year, and found thousands more drilling locations.

The Houston oil producer said it has boosted the number of potential drilling spots in the area from between 2,000 and 3,000 up to 5,000.

More than half of those spots, around 3,500, are in a so-called wet gas window, with 1,000 in a dry gas region and another 500 in the oil-rich Wolfcamp and Bone Springs play.

“Each of these plays is highly economic at current commodity prices,” Apache CEO John Christmann said in a statement.

Factoid: Oklahoma Oil Towns – Drumright

The town sprang up nearly overnight in 1912, after wildcatter Tom Slick struck oil on the farm of Frank Wheeler, causing a rush of speculators, oilfield workers, and merchants into the area. A post office was established in the community on December 28, 1912. Oil workers flooded into town so quickly that they lived in tents or shacks made from box cars, causing the community to be known locally as “Ragtown.”

API & EIA REPORT SUMMARY

Data for the API and EIA Reports were released a day late due to the holiday on Monday.

The American Petroleum Institute reported Wednesday that U.S. crude supplies rose by 3.1 million barrels for the week ended Oct. 6, according to sources. The API data also showed that gasoline stockpiles declined by 1.6 million barrels, but inventories of distillates rose by 2 million barrels, sources said.

In contrast, the Energy Information Administration said on Thursday that U.S. crude oil inventories fell last week as refining rates rose, while gasoline posted an unexpected hefty build.

Crude inventories dropped 2.7 million barrels in the week to Oct. 6, slightly more than analysts’ expectations in a Reuters poll for a decrease of 2 million barrels.

Inventories have been declining in recent weeks, after an interruption due to Hurricane Harvey that knocked out nearly half of the Gulf Coast’s refining capacity at the end of August.

Refinery crude runs rose by 229,000 barrels per day as utilization rates rose by 1.1 percentage points to 89.2 percent of total capacity, the EIA data showed.

Oil prices rebounded from earlier losses, but ended lower on the day, after the Energy Department reported a larger-than-expected decline in U.S. inventories and a falloff in weekly production on Thursday.

Oil has strengthened in recent weeks, but it is unclear whether U.S. crude prices will regain the high of nearly $53 a barrel reached in late September. A surprise build in gasoline inventories fed concern that crude stocks may begin to rise again, sapping some strength from the recent rally.

Brent crude oil settled down 69 cents, to $56.25 a barrel while U.S. light crude ended down 70 cents, to $50.60 a barrel. Both benchmarks have risen more than 20 percent from their lows in June as world oil markets tightened.

NAT GAS NEWS

Data from the U.S. Energy Information Administration on Thursday showed that domestic supplies of natural gas rose by 87 billion cubic feet for the week ended Oct. 6. That nearly met the average forecast for a climb of 86 billion cubic feet by analysts surveyed by S&P Global Platts. Total stocks now stand at 3.595 trillion cubic feet, down 153 billion cubic feet from a year ago, and 8 billion cubic feet below the five-year average, the government said.

November natural gas NGX17, closed Thursday at $2.989 per million British thermal units.

Brazos Midstream buys Delaware basin gas gathering system

Subsidiaries of Brazos Midstream Holdings LLC, Fort Worth, have completed their acquisition of a natural gas gathering system in the southern Delaware basin from Callon Petroleum Co., Natchez, Miss.

The gathering system will connect to Brazos’ existing system that includes the previously announced 200-MMcfd Comanche II gas processing plant, which will be completed in January 2018 and bring Brazos’ total operated processing capacity to 260 MMcfd. The company earlier this year started operations from its 60-MMcfd Comanche I plant.

Brazos also is advancing plans to build a 200-MMcfd Comanche III plant, for which the company has secured a site and will begin construction in early 2018.

As part of the deal, Brazos signed a long-term, fee-based agreement with Callon for gas gathering and processing services for acreage under development in the southern Delaware’s Ward and Pecos counties in Texas. Including the Callon dedication, Brazos’ midstream infrastructure is anchored by long-term acreage dedications with Permian operators covering 240,000 acres.

In addition to its gas processing complex, Brazos operates 275 miles of gas and oil pipeline and 50,000 bbl of crude storage in the Delaware basin. The company is supported by equity commitments from affiliates of Boston-based energy investor Old Ironsides Energy LLC and a revolving credit facility with multiple banks.

Remember when: Jackson Barnett #11 Well – Cushing Field

“JACKSON BARNETT NUMBER 11 WAS THE FIRST MILLION BARREL WELL IN THE CUSHING FIELD AND ESTABLISHED A NEW STATE RECORD FOR DAILY PRODUCTION FROM A SINGLE WELL.

The Jackson Barnett No. 11 Oil Well was the most productive oil well in the Cushing Oil Field of northeastern Oklahoma, to the south of Drumright. The well was drilled in 1916 in the Shamrock Dome section of the Cushing field by the Gypsy Oil Company, striking oil on February 17. The well was on the land of Jackson Barnett, a Creek landowner who subsequently became known as the “world’s richest Indian.”

The well was drilled into the Tucker sand layer at a depth between 2,800 feet and 3,000 feet . Production on the well’s first day was 4,000 barrels, rising to 10,000 barrels a day and peaking at 18,000 barrels per day. Average production was 10,000 barrels a day for most of its life.

Thai coal miner Banpu Pcl said on Monday it has signed an agreement to acquire a controlling interest in a shale gas block in the United States in a deal valued at $210 million.

The investment will allow Banpu to take a nearly 80 percent interest in 112 wells in Marcellus shale in northeast Pennsylvania, giving it access to 32,350 net acres in the area with proven reserves of 414 billion cubic feet of gas, the company said in a statement.

The investment is Banpu’s fifth in U.S. shale gas as the company expands beyond its coal interests. Last month, it said it was buying a 25.7 percent stake in Singaporean green energy firm Sunseap Group Pte Ltd for $55.7 million.

Friday Snippets

US drillers can expect steady borrowing bases this fall

Borrowing bases will likely decrease for only 26% of affected US drillers this fall, compared with 41% of borrowers who were facing declines a year ago, according to a survey by Haynes and Boone. “Reading between the lines, it may be that banks remain reluctant to take any aggressive action reducing borrowing bases closer to their true value for fear of putting too much pressure on some producers who have been financially distressed since the beginning of this downturn in prices,” said Haynes and Boone partner Buddy Clark.

India’s Reliance Industries divests US shale gas asset

Indian conglomerate Reliance Industries is selling an oil and natural gas asset in the Marcellus Shale to an affiliate of energy investment firm Kalnin Ventures for $126 million. The Marcellus property, which Reliance paid $392 million for, is one of three US shale assets the company purchased in 2010 for over $2 billion combined.

Denbury Resources planning carbon dioxide pipeline in Mont.

Denbury Resources has filed an application to build a $150 million, 110-mile pipeline in eastern Montana that would carry carbon dioxide destined for use in oil production at the Cedar Creek Anticline oilfield near the border with North Dakota. The Bureau of Land Management is taking public comments on the proposed project until Nov. 3.

OPEC urges US shale producers to restrict oil supplies

US producers of shale oil might need to cut back production to bring the world’s oil market into balance, said Mohammed Barkindo, secretary-general of OPEC. “We urge our friends in the shale basins of North America to take this shared responsibility with all seriousness it deserves, as one of the key lessons learnt from the current unique supply-driven cycle,” he said at a conference.

Drilling up in southeast Okla. basin

Drilling activity is rising in southeast Oklahoma’s Arkoma Woodford Basin, where the number of rigs has increased 175% from a year ago. The 11 rigs in the basin are for natural gas, although one company says its rigs are also producing oil.

Vitol: US oil production growth to flatline after 2018

US oil output could increase by 500,000 to 600,000 barrels per day in 2018, leading to a rise in costs that will likely drag growth to a standstill in the years to follow as some production becomes unprofitable, according to Ian Taylor, president and CEO of oil trader Vitol. Slowing US production growth along with strong global demand should bolster oil prices, lifting them above the $50-to-$60-per-barrel range, Taylor added.

Oklahoma State Treasurer Ken Miller reported that overall gross receipts for September rose 7.7% year-on-year in a sign that the state’s economy is strengthening, partly thanks to increased drilling activity and improvements in the oil market. Gross production tax revenue was up 60% in September from a year ago, while gross production taxes in the past 12 months grew 41.8% over the previous 12-month period.

Signs of slowing US shale boom become more evident

The slowing pace of technological and operational innovation, along with labor constraints and soaring oilfield services costs, are causing US shale producers to scale back drilling, casting doubt on US oil’s ability to fill global oil supply gaps in the future. The US rig count increased 6% in the third quarter, down from an average increase of more than 20% in the previous four quarters, while US oil production is expected to reach 9.69 million barrels per day by year’s end, down from an original estimate of 9.82 million.

Half of US upstream oil and natural gas executives polled by Deloitte expect reduced capital spending in 2018 versus 2016, while almost 60% of respondents also anticipate a decline in the number of rigs deployed across the US next year compared with last year. The majority of executives also say oil prices will hold below $60 per barrel through 2018 and only increase to $70 per barrel in the 2020s.

N.D. posts oil production growth in August

North Dakota produced 1.084 million barrels per day in August, up from 1.048 million barrels of oil per day in July, while natural gas output rose to a preliminary all-time high of 1.943 billion cubic feet per day, according to the state’s Department of Mineral Resources. The state had 14,080 producing wells in August, while the number of active rigs was 57.

N.D. sees jump in dealmaking activity

Dealmaking activity in North Dakota increased sharply last month, with 681 wells having changed or being on their way to changing ownership, compared with just 100 to 125 well transfers in a typical month, according to state Department of Mineral Resources Director Lynn Helms. “Companies in this price environment are starting to look at the different business units that they were investing in and pick out the ones that are more profitable and sell off the other stuff,” Helms said.

October 6, 2017

Ward Energy Partners Sells SCOOP and Hoxbar Assets

Ward Energy Partners, LLC (“WEP”) today announced it has sold assets located primarily in Stephens and Grady Counties in Oklahoma to an undisclosed buyer. The assets are prospective for the Woodford, Mississippian and Springer reservoirs in the SCOOP and Hoxbar oil trend. WEP will continue to own and operate assets in the STACK play in Oklahoma and the Denver-Julesburg basin in Colorado.

“Ward has been drilling wells in the SCOOP area of Oklahoma since the early 1980’s. It is a great area with a world class petroleum system, outstanding reservoir rock and stacked pays. I believe you will see continued improvements that will create significant value for the players,” said Bill Ward, President of Ward Energy Partners.

WEP is an oil and gas exploration and production company formed in July 2014 by Ward Petroleum Corporation, a diversified exploration and production company based in Oklahoma and Colorado, and Trilantic Capital Management L.P., a leading private equity firm based in New York and Texas.

High Costs and Investor Pressure Slow Permian Basin Excitement

A study confirms that rising production costs as well as high prices for leases have led to a slowdown in the Permian Basin in Texas and New Mexico.

Writing this week, the Houston Chronicle found that while drillers spent $35 billion in West Texas over 9 months ending in the spring, the collective value of land deals of the last six months has been less than $5 billion. The paper cited energy research firm Wood Mackenzie.

One of the reasons was to be expected….skyrocketing prices of land. In some cases, it was more than $30,000 an acre. And as exploration companies sent more and more rigs and trucks and crews to the region, their costs naturally went up as well.

Add to the fact that with OPEC’s announcement of curbing global crude supplies, U.S. drillers rushed into the region.

Greig Aitken, head of upstream oil and gas mergers and acquisitions at Wood Mackenzie said they had to know it wouldn’t last.

“The market was throwing money at them to buy things.”

Then there is the pressure from investors who want companies to spend within their means and not rely on debt or outside capital. Just last week, Anadarko Petroleum moved to ease the pressure from investors by spending $2.5 billion to rebuy shares through the end of the year.

Oklahoma’s September revenue gets expected boost

A recent change in the tax rate on oil and gas production helped lift September collections well past the same month last year.

NewsOK reports that Oklahoma brought in $1 billion last month, which is $72.4 million or 7.7 percent higher than September 2016. During their last regular session, lawmakers raised the tax rate on older wells. Doing so boosted revenue by nearly $7 million.

As lawmakers negotiate during special session, one of the items on the table is another gross production tax increase. However, leaders in the House, Senate and governor’s office haven’t settled on a percentage or how broad an increase might be sought.

Legislators also implemented a new 1.25 percent tax on motor vehicle sales; the change brought in $11.1 million, according to Treasurer Ken Miller. Overall, tax changes made this year accounted for more than $23 million in September revenue. Those changes also include the elimination of a discount offered to businesses that collect sales tax, a higher fee on motor vehicle registrations and elimination of gross production tax rebate payments.

Since August, the law changes have yielded $40.5 million in new gross revenue.
In his monthly report on state collections, Miller also attributed much of the revenue gains to a strengthening economy.

Hi-Crush Partners LP (HCLP), or Hi-Crush, today announced the company has commenced operations at its new Pecos, Texas terminal, the first unit-train capable terminal with silo storage in the Southern Delaware Basin. Hi-Crush is actively delivering produced sand via rail to the Pecos terminal, which includes 20,000 tons of vertical silo storage on-site, from two of its Union Pacific connected Northern White facilities in Wisconsin. On October 3, 2017, Hi-Crush began loading customer trucks for delivery to support local completions activity.

“We are excited to complete construction on schedule and start operations at our third Permian Basin terminal,” said Robert E. Rasmus, Chief Executive Officer of Hi-Crush. “The completion of the Pecos facility augments our existing capabilities, which include our Odessa and Big Spring terminals in the Midland Basin, and extends our advantage in the region. The addition of Pecos complements our leading network of owned and operated logistics assets, which in addition to our recently completed in-basin Kermit facility, provides our customers with flexibility and diversity across sand product, and enhances surety of supply by mitigating potential logistical bottlenecks in these highly active areas.”

Factoid: Oklahoma Oil Towns

Whizbang, officially called Denoya, Oklahoma, was an Oklahoma petroleum boom town in the 1920s and 1930s. Located in Osage County 1.5 miles north and 1.5 miles west of the present town of Shidler, The Whizbang area at its peak had a population of 10,000 persons and 300 businesses and was considered the rowdiest of the many oil field towns in Oklahoma. Persons who lived and worked near Whizbang during its heyday included oilmen E.W. Marland and Frank Phillips and future actors Ben Johnson, Jr., a cowboy and rodeo star, and Clark Gable who worked as a roustabout in the oil fields. With the exhaustion of the petroleum reserves in the late 1920s Whizbang declined. The post office, established in 1921, was closed in 1942, and today little remains of the town except a network of old roads.

EIA REPORT SUMMARY

U.S. crude oil stocks fell sharply last week as crude exports rose to a record high of nearly 2 million barrels per day, the Energy Information Administration said on Wednesday.

Crude inventories fell 6 million barrels in the week to Sept. 29, compared with analysts’ expectations for a decrease of 756,000 barrels. Inventories have dropped in the past two weeks as Gulf Coast refineries restart after weeks of shutdowns due to Hurricane Harvey. The American Petroleum Institute had reported late Tuesday a decrease of 4.1 million barrels, according to sources.

Crude exports, meanwhile, jumped to 1.98 million bpd, surpassing the 1.5 million bpd record set the previous week. The jump in U.S. exports points to growing demand and the rising profile of the United States as a major supplier of crude and products around the world.

Crude prices rebounded on Thursday after falling below $50 a barrel as a potential hurricane threatened to enter the Gulf of Mexico, according to Bloomberg MarketWatch.

On the New York Mercantile Exchange, November West Texas Intermediate crude rose 81 cents, or 1.6%, to settle at $50.79 a barrel.

December Brent crude, the global oil benchmark, rose $1.20, or 2.2%, to end trading at $57 a barrel on London’s ICE Futures Exchange.

NAT GAS NEWS

The U.S. Energy Information Administration (EIA) reported Thursday morning that U.S. natural gas stocks increased by 42 billion cubic feet for the week ending September 29. Analysts were expecting a storage injection of between 48 billion and 58 billion cubic feet. The five-year average for the week is an injection of 91 billion cubic feet, and last year’s storage injection for the week totaled 80 billion cubic feet. Natural gas inventories rose by 58 billion cubic feet in the week ending September 22.

Natural gas futures for November delivery traded up about 1% in advance of the EIA’s report, at around $2.98 per million BTUs, and traded down slightly at $2.97 shortly after the report was released. The highest close for the past five trading days was registered last Thursday at $3.02. The 52-week range for natural gas is $2.87 to $3.65. One year ago the price for a million BTUs was around $3.19.

November natural gas NGX17, closed Thursday at $2.923 per million British thermal units.

Oil and natural gas operators began evacuating staff and halting production at U.S. Gulf of Mexico platforms Thursday ahead of Tropical Storm Nate, the second storm in as many months to rattle the Gulf Coast energy corridor.

BP joins the list of companies reportedly shutting all production of oil and natural gas from its four platforms in the region.

Anadarko Petroleum (NYSE:APC) is shutting production at two Gulf platforms and removing non-essential personnel from four others.

Exxon Mobil Corp. is evacuating staff from a platform and Chevron Corp. is preparing to shut down two platforms

Phillips 66 (NYSE:PSX) is shutting its 247K bbl/day Alliance refinery south of New Orleans.

While energy production may be hampered, most Gulf offshore rigs and platforms, and oil refining and gas processing on the coast, likely will be on the west side of the storm – typically the weaker side; the greater risk is to U.S. cotton-growing areas, particularly Alabama and Georgia.

Remember when: Columbus Marion (“Dad”) Joiner & the East Texas Field

Joiner became convinced that some flatlands in an East Texas basin like structure contained oil. He obtained a lease near Tyler, Texas, and on October 5, 1930, after having drilled two dry holes, struck perhaps the largest oil pool ever found in America. It lay beneath 140,000 acres and contained 5 billion barrels. H. L. Hunt, an oil entrepreneur, bought Joiner’s leases and later sold them to oil companies at a profit of $100 million, thereby adding to his already substantial fortune.

New Leadership at Anadarko Petroleum

Houston-based Anadarko Petroleum has announced a change in company leadership with leaders saying it falls in line with the firm’s $7.5 billion in the sale of non-core assets over the past two years.

Anadarko Chairman, President and CEO Al Walker said Danny Brown will be the new Executive Vice President of U.S. Onshore Operations. He previously was a Vice President of International and Deepwater Operations.

Mitch Ingram takes over as Executive Vice President of the International and Deepwater Operations. Ernie Leyendecker is now Executive Vice President of Exploration.

Brad Holly, a former Executive Vice President of U.S. Onshore Exploration and Production is leaving the company to pursue other interests.

Closing Thought: Good judgment comes from experience, and a lot of that comes from bad judgment. – Will Rogers

Friday Snippets

Permian dealmaking frenzy starts to cool down

The value of land deals in the Permian Basin has dropped significantly over the past six months, with drillers spending less than $5 billion on acreage, compared with $35 billion from summer 2016 to early spring 2017, according to Wood Mackenzie. This is due to exorbitant land prices of more than $30,000 per acre, higher oilfield service costs, labor shortages and pressure from investors to focus on returns rather than growth.

API: Crude supplies drop for 2nd straight week

US crude stockpiles recorded a 4.1-million-barrel decline for the week ended Friday, the secondconsecutive week of declines, while gasoline inventories jumped by 4.2 million barrels and distillate supplies fell by 584,000 barrels, according to the American Petroleum Institute. “The crude draws continue, but a big build in Cushing [Okla.] and gasoline stocks may slow the momentum,” Price Futures Group’s Phil Flynn said.

Hurricane Harvey damage for Occidental Petroleum totals $70M

Hurricane Harvey took a $70 million toll on Occidental Petroleum’s income as the company was forced to close its oil export terminal and several other Gulf Coast chemical facilities for days. However, Occidental said its fourth-quarter earnings won’t be affected and it is still on track to break even at $50-per-barrel oil.

US shale stands in the way of market rebalancing, higher oil prices

Experts fear oil prices have little room to run this year as surging US shale production puts market rebalancing at risk. West Texas Intermediate futures should average $49.88 a barrel in 2017 and $51.61 in 2018, down from last month’s forecasts of $50.01 and $51.92 respectively, according to a Reuters poll of 36 analysts and economists.

Flat well productivity casts shadow over Eagle Ford Shale

Despite technological advancements that have helped the oil industry become more efficient, Eagle Ford Shale wells posted few productivity improvements between 2013 and 2017, while productivity in parts of the Permian Basin doubled over the same period. Nonetheless, the Eagle Ford will likely continue to attract investors as rising costs drive producers out of the Permian Basin, potentially helping improve the region’s productivity.

US shale drillers and Canadian oil sands operators need oil prices to hold above $50 per barrel and natural gas prices of at least $3 per million British thermal units to achieve long-term capital efficiency, according to a Moody’s report. Moody’s analysts Sreedhar Kona and Steven Wood say US and Canadian producers made significant progress reducing costs over the past few years, but they now have little room left to further cut expenses and therefore need higher commodity prices to generate positive cash flow.

Citigroup believes current oil price rally is sustainable

Oil prices will likely continue to rally until the end of the year, driven by fundamentals and strong financial markets, according to Citigroup Global Head of Commodities Research Ed Morse. Citigroup sees West Texas Intermediate and Brent crude hitting $54 and $58 per barrel respectively in the fourth quarter, while natural gas prices could jump from $2.91 per million British thermal units now to $3.70 per million British thermal units by the end of the winter.

US crude exports jump to new record in Harvey’s wake

The US exported 1.98 million barrels of crude per day last week, the highest level since 1993, as overseas buyers rush to take advantage of the wide West Texas Intermediate-Brent spread caused by Hurricane Harvey. However, Turner, Mason Executive Vice President John Auers warned that the surge in crude exports will be short-lived as “Gulf Coast demand recovering from the storm will mean less domestic crude will leave the US.”

Lilis Energy boosts Delaware Basin footprint

San Antonio-based Lilis Energy has acquired 4,000 acres in the Delaware Basin from a private seller for $45.6 million in a move than brings the company’s position in the region to over 15,000 acres. The transaction is expected to close in November.

Horizontal drilling threatens to kill vertical wells in Okla.

Horizontal drilling in Oklahoma’s shale plays is causing headaches for small operators of vertical wells, who are forced to fight legal battles to be compensated for the damages lateral wells have caused to old wells. For example, vertical well operator Brown & Borelli claims horizontal drilling has affected more than a third of its 65 to 70 wells, resulting in about $250,000 per year in lost production and $150,000 in additional costs.

Wood Mackenzie predicts a surge in mergers and acquisitions sought by Marcellus and Utica Shale natural gas producers, partly driven by pipeline capacity increases and expectations that gas prices will hold near $3 per 1,000 cubic feet over the next decade. “Companies are looking at incremental capacity, contract capacity and where to get the best price, and if there is someone who can get them access to better prices, then they want to do that deal,” Wood Mackenzie Head of Upstream Oil and Gas Mergers and Acquisitions Greig Aitken said.

TransCanada Pulls Plug On $12B Pipeline Project

TransCanada Corp. on Thursday said it’s scrapping its proposed $12 billion Energy East pipeline, less than two months after Canadian energy regulators imposed a stricter environmental review process on the controversial, cross-country project.

September 29, 2017

Chevron to invest $4 billion to boost Permian Basin output

Oil major Chevron Corp will next year invest around $4 billion to ramp up its crude production in the Permian Basin area of the United States, a company executive said on Monday.

Ryan Krogmeier, Chevron’s vice president of crude supply and trading, told the S&P Global Platts APPEC conference in Singapore that the company would increase its output from the Permian Basin, largely situated in Texas and New Mexico, to over 400,000 barrels per day over the next few years.

“We will be investing roughly $4 billion, next year, of capital in the Permian Basin, and we plan to grow production over the next several years to well in excess of 400,000 bpd,” he said.

Chevron expects crude oil output from all producers operating in Permian to rise by 1.4 million bpd in 2020, from 2.4 million bpd at present.

Chesapeake Energy Corp said on Tuesday it expects a 15 percent drop in third-quarter production, partly blaming Hurricane Harvey, which forced the company to stop work in the Eagle Ford shale region of Texas.

Chesapeake had warned that Harvey would impact its business and said on Tuesday it expects current-quarter production to be about 542,000 barrels of oil equivalent per day (boepd), lower than the 638,100 boepd it reported a year earlier.

Chesapeake had warned that Harvey would impact its business and said on Tuesday it expects current-quarter production to be about 542,000 barrels of oil equivalent per day (boepd), lower than the 638,100 boepd it reported a year earlier.

That would help the company hit its target of oil volumes averaging about 100,000 barrels per day in the quarter, Chief Executive Doug Lawler said.

Still, Chesapeake trimmed its adjusted production forecast for the full year.

The company now expects full-year production to range between a drop of 1 percent and an increase of 1 percent, compared with its previous view of flat to 4 percent growth.

Chesapeake maintained its full-year total capital budget of $2.10 billion to $2.50 billion.

Exxon adds 22,000 acres in Permian Basin

Exxon Mobil has snapped up 22,000 acres in the Permian Basin since May, expanding its footprint in West Texas and New Mexico through undisclosed acquisitions.

The Irving-based oil company said Wednesday it bought prolific oil land sitting on top of multiple layers of oil-soaked rock known as stacked pay zones, in the Delaware Basin and the Midland Basin.

The recent transactions represent important additions to ExxonMobil’s established core positions in the Delaware and Midland Basins. In February, ExxonMobil acquired 250,000 acres in the Delaware Basin from companies owned by the Bass family of Fort Worth. In the Midland Basin, the company has doubled its core operated acreage to more than 130,000 acres through multiple transactions over the last few years.

ExxonMobil is one of the most active operators in the Permian Basin, currently operating 19 drilling rigs, 14 of which are drilling horizontal wells in the core Midland Basin, where the company has added 200 wells since mid-2014. The company also has four rigs drilling horizontal wells in the Delaware Basin of New Mexico, where the company recently drilled its first 12,500-foot horizontal lateral length well.

The Permian has been a major focus for E&P since 2016, with producers spending about $27 billion in the area through mid-2017.

Texas producers have primarily targeted Martin, Glasscock, Howard and Reagan counties in the Midland Basin and Reeves, Pecos and Ward counties in the Delaware Basin. Many of the acquisitions have been solely for undeveloped acreage.

Factoid: Oklahoma Oil TownsOil City is a small unincorporated community in Carter County, Oklahoma.The community was established in 1896. It was originally named Wheeler, but the name of its post office was officially changed on October 15, 1919. The post office closed in 1930.

EIA REPORT SUMMARY

U.S. crude stockpiles drop as refineries restart after Harvey

U.S. crude oil inventories fell unexpectedly last week as refineries hiked output due to restarts following Hurricane Harvey and exports soared, while gasoline stockpiles posted a surprise build, the Energy Information Administration (EIA) said Sept. 27.

Crude inventories fell 1.8 million barrels (MMbbl) in the week to Sept. 22, compared with analysts’ expectations for an increase of 3.4 MMbbl.

“The highlight from today’s EIA report isn’t the larger-than-expected draw to stocks, but the reported cause of this draw,” said Troy Vincent, oil analyst with Clipper Data. “The EIA showed both refinery runs and exports surging higher last week.”

Oil prices slipped on Thursday, further backing off from 2015 peaks hit earlier in the week.

Crude has risen sharply in the last two-and-a-half weeks as traders anticipated renewed demand from U.S. refiners who were resuming operations after shutdowns due to Hurricane Harvey. Major world oil producers have also indicated that they will stick with output cuts to limit supply.

U.S. crude has gained 9 percent in 14 trading days, with Brent up 7 percent in that time. Both benchmarks are near overbought levels, based on an index of relative strength, which measures the speed and magnitude of price movements.

The U.S. benchmark, West Texas Intermediate crude for November delivery CLX7, fell by 58 cents, to settle at $51.56 a barrel on the New York Mercantile Exchange. Prices are still up around 2% for the week, poised for a monthly rise of 7.6%

The natural gas rig count rose by four to 190 in the week ended September 22, 2017. YoY (year-over-year), the natural gas rig count has more than doubled. However, the price of natural gas fell 2.6% YoY.

Natural gas production

The natural gas rig count has fallen 88.2% from its record high in 2008. However, natural gas supplies have kept rising. The upsurge in the oil rig count due to high demand over the last decade could be behind the higher gas supplies.

November natural gas NGX17, closed Thursday at $3.017 per million British thermal units.

Oklahoma House and Senate recess without budget deal

The Oklahoma House and Senate recessed from the special session on Wednesday without a deal to close an estimated $215 million state budget shortfall, which could deal a crippling blow to agencies that provide health care services to the poor and mentally ill.

The House, where revenue raising measures are required to originate, recessed after it became clear there weren’t 76 members willing to support a $1.50-per-pack cigarette tax increase to help restore the lost funding. The Legislature earlier this year approved a similar cigarette tax with a simple-majority vote, but the Supreme Court ruled it was unconstitutional because it was passed in the last five days of session and didn’t receive the required three-fourth’s vote needed for a revenue bill.

Republicans have a 72-28 advantage in the House, but some GOP members oppose any tax increases and many Democrats have said they won’t support a cigarette tax hike without an agreement to also increase either the tax on oil and gas production or income on those families earning more than $200,000 per year.

In 1911 the Supreme Court declared that the Standard Trust had operated to monopolize and restrain trade, and it ordered the trust dissolved into thirty-four companies. That the trust’s share of the industry had declined from 33 to 13 percent the Court held to be of little consequence. The splitting-off of the Standard affiliates proved difficult. Some marketed, some produced, some refined, and these concerns quickly moved toward vertical integration of their businesses. But the 1911 decision ensured that though the industry might have giants, they at least competed with one another.

– Drillers need prices to stay above $50 a barrel for oil and $3 per mmBtu for natural gas in order to make a significant return on capital, Moody’s says.

– Producers have driven down costs, but capital efficiency now depends on higher oil and gas prices, the ratings agency concludes.

– U.S. crude prices touched a five-month intraday high at $52.86

Oil prices below $50 are simply not going to cut it in the U.S. shale oil patch, Moody’s analysts say in a new research note.

Exploration and production companies have managed to drive down their costs since oil prices crashed in late 2014. But Moody’s believes it will be difficult for drillers to cut much deeper, and any reductions will be offset by a rebound in the prices that oilfield services companies charge.

For that reason, drillers won’t be able to make significant returns on the capital they plow into new production unless benchmark U.S. West Texas Intermediate crude oil and natural gas prices cooperate, Moody’s said.

“Despite substantially improved cost structures, E&P companies will be able to generate meaningful capital efficiency, only if the WTI oil price is above $50 per bbl and the Henry Hub natural gas price is at least $3.00 per” million British thermal units, Moody’s senior analyst Sreedhar Kona concludes in the report.

But Moody’s makes an important point: Drillers can’t just break even on their production. Eventually, they need to “recover their costs, earn a meaningful return on their investments, reinvest in further development of their acreage, repay debt and reward shareholders for the risk and cyclicality associated with the industry.”

Closing Thought: Plan in Decades, Think in Years, Work in Months and Live in Days. – Kim Fantaci

Have a great weekend from Oklahoma Minerals!
Gib Knight

Friday Snippets

Phillips 66 Sells Energy Assets To MLP In $2.4B Deal

Houston-based energy company Phillips 66 will sell its interest in a trio of assets, including joint ventures that make up the Bakken Pipeline project, to its master limited partnership in a deal valued at $2.4 billion, the MLP announced last week.

IHS Markit study explores Permian Basin’s resource potential

A three-year study conducted by IHS Markit estimates that the Permian Basin still holds 60 billion to 70 billion barrels of technically recoverable oil, worth about $3.3 trillion at current West Texas Intermediate prices. “The Permian Basin is America’s super basin in terms of its oil and gas production history, and for operators, it presents a significant variety of stacked targets that are profitable at today’s oil prices,” IHS Director of Unconventional Resources Prithiraj Chungkham said.

AP’s Jack Gerard on the state of US energy security, policy

In an interview, American Petroleum Institute President and CEO Jack Gerard said the US’ shift from being an importer to a major exporter of energy, along with the current administration’s focus on energy dominance, are helping provide the nation with cleaner, cheaper and more reliable energy. Now that energy production has become sustainable due to technological advances, the US is closer than ever to achieving energy security, Gerard said, underscoring the importance of smart regulation in protecting “the American people, the environment and our workforce.”

Commodities expert predicts US oil will hit $55 per barrel

Commodities expert Dennis Gartman says US crude could climb to $55 per barrel as the surge in demand and decline in supply could help make the current oil price rally more sustainable. However, the problem is that once oil hits the $55-per-barrel mark, Permian Basin and Eagle Ford producers will start bringing more drilled-but-uncompleted wells into production, he says.

Oil drilling may rise 23.3% worldwide this year

After a weak 2016, worldwide oil drilling is expected to increase 23.3% this year, bringing the total number of wells to 63,565, and North American drilling activity should post a 45% gain, writes Kurt Abraham. The top four drilling countries — in order, the US, China, Russia and Canada — will make up 84.4% of global drilling.

Hurricane Maria takes a toll on US refiners

Two East Coast refineries, owned by Philadelphia Energy Solutions and Delta Air Lines respectively, have been forced to cut rates by up to 30% as Hurricane Maria disrupts crude deliveries to the facilities even without making landfall. “Product prices are rallying in response to refinery run cuts on the East Coast, which will result in lower product availability in the short term,” Lipow Oil Associates President Andrew Lipow said.

As Permian boom continues unabated, some oilmen fear a bust may be looming

Shale drillers’ Permian Basin success stories could soon turn into a debacle as over-capitalized firms drill too fast with no regard to profit margins. This, along with soaring prices for equipment, a shortage of skilled workers and some drillers’ shift from prime acreage to less productive formations, are signs of a market on the verge of overheating.

Pipeline projects at risk as crude-by-rail makes a comeback

The advantages offered by rail transportation of crude oil, such as the flexibility and ease of access to remote shale plays, could undermine investments in pipeline projects in the future, according to a study conducted by two University of Chicago professors. The cost of moving crude by rail may also influence the size of pipeline projects, with the authors of the study estimating that an increase of $1 per barrel in the cost of crude-by-rail transport could have added between 29,000 and 74,000 barrels of daily capacity to the Dakota Access Pipeline.

Cheniere Energy is seeking permission from the Federal Energy Regulatory Commission to bring the fourth liquefaction train at its Sabine Pass liquefied natural gas facility in Louisiana into service. “Commissioning demonstration tests, which confirm the facilities can be operated safely and reliably, have been successfully completed for train 4, thus Sabine Pass confirms that train 4 can be expected to operate safely as designed,” the company told FERC.

Chesapeake revises down 2017 production guidance

The disruption caused by Hurricane Harvey has prompted Chesapeake Energy to lower its production estimates, anticipating a 15% decline in third-quarter output to 542,000 barrels of oil equivalent per day. The company also revised down its full-year production guidance to between 1% decline and 1% growth, compared with its previous outlook of flat to 4% growth.

US independent producer Chaparral Energy has formed a joint venture with Bayou City Energy to drill 30 wells in the STACK play in Oklahoma. Bayou City will contribute $100 million to the joint venture, covering 100% of the costs associated with the wells, which will be drilled on Chaparral’s STACK position.

US Silica to build 2nd frac sand facility in Permian Basin

US Silica said it would spend $150 million to build a second frac sand mine near Lamesa, Texas, in the Permian Basin to meet surging frac sand demand from shale drillers. The 3,500-acre mine, scheduled to come online in March, boasts over 30 years of reserves and is expected to produce about 2.87 million tons of sand per year.

September 22, 2017

Oklahoma STACK development still in first inning, energy executives say

There’s been some home runs with monster oil wells coming online, but development in Oklahoma’s STACK formation is still very much in the first inning, executives said Thursday at the DUG MidContinent conference in Oklahoma City.

Newfield drilled is first STACK horizontal well in 2012. The company now gets two-thirds of its production and spends 80 percent of its capital in Oklahoma’s Anadarko Basin, which includes its holdings in the STACK. Newfield has grown its STACK acreage to 350,000 net acres.

A report from members of the Oklahoma Energy Producers Alliance suggests horizontal drilling and fracking has economically damaged at least 450 older vertical wells in Kingfisher County alone.

The report by the group of oil and gas producers — which formed during the 2017 Legislative Session in opposition to other industry groups over gross production taxes and long-lateral drilling bills — suggests so-called “well bashing” is widespread “and that damage has cost producers and royalty owners throughout the state,” The Oklahoman‘s Adam Wilmoth reports:

— “I believe nearly every vertical well in Kingfisher County will be negatively impacted by horizontal frack jobs at some point,” OEPA founder Mike Cantrell said. “We’re just trying to get people to get fair value for their property up front before the damage is done.”

The study shows that 80 percent of the affected vertical wells are outside the well unit boundaries, meaning royalty owners from the damaged wells do not benefit from the new horizontal wells.

Horizontal operators say the OEPA is overstating the number of damaged wells, and that royalty owners benefit from highly productive horizontal wells.

A.J. Ferate, vice president of regulatory affairs at the Oklahoma Independent Petroleum Association, says horizontal operators often “try to address potential damage to vertical wells before operations begin, but vertical operators are unwilling to negotiate,” the paper reports:

–“Particularly in Kingfisher County, larger companies drilling horizontal wells are offering ahead of time that if they bash a well, they’ll give concessions or pay damages or give them a part of the well,” he said. “Many times they try to buy the well ahead of time, but in many instances they have been told ‘no.’”

Recent rumblings in two cities likely are aftershocks, not signals of stronger earthquakes to come, said state and federal scientists.

However, researchers and regulators said they keep a close eye on Cushing and the surrounding area, in part because the nation’s largest crude storage hub is there. They’re also concerned about potential cumulative damage to structures from previous quakes.

A magnitude 5 quake struck Cushing in November, and there have been 27 aftershocks since then, according to the Oklahoma Geological Survey. Six of those aftershocks were magnitude 3 or stronger, three of which have happened in the last two weeks. A magnitude 4.2 hit Stroud July 14, about 20 miles south of Cushing. Six aftershocks have hit Stroud since then, including a magnitude 3.9 recorded Saturday.

Many of Oklahoma’s earthquakes have been linked to wastewater disposal from oil and gas activity. But proving causation is difficult, in part because the state has so many wastewater wells and so many temblors. Proving causation is also difficult because there’s a lag between injection time and measured earthquakes.

Oil and gas regulators have placed restrictions on disposal wells, which researchers said likely contributed to the declining earthquake rate statewide in 2016 and in 2017. Reduced oil and gas production also likely contributed.

Factoid: The Troll A platform, installed in 1996 offshore Norway, is the world’s biggest structure ever moved by mankind. It weighs 656,000 tonnes and the base is built from concrete. It is 472 meters high (1545’) overall, which is slightly shorter than the One World Trade Center, which is the tallest building in the Western Hemisphere. That building, including its spire, reaches a total height of 1,776 feet (541 m).

EIA & API REPORT SUMMARY

US crude oil stocks increased by 4.6 MMBbl last week. Gasoline and distillate stocks decreased by 2.1 MMBbl and 5.7 MMBbl respectively. Yesterday afternoon, API had reported a crude oil build of 1.4 MMBbl, alongside gasoline and distillate withdrawals of 5.1 MMBbl and 6.1 MMBbl respectively. Analysts were expecting a larger crude build of 2.4 MMBbl. Gasoline storage is now below the 2015 level. Distillate storage is now below the five-year average.The most important number to keep an eye on, total petroleum inventories, posted a sizeable withdrawal of 6.6 MMBbl.

Heading into this week, the consensus was expecting material crude builds to take place. The thinking was that U.S. crude imports would jump as the Gulf Coast import facilities get back to normal, but that’s not what happened. U.S. crude imports rose to 7.368 million b/d from 6.48 million b/d last week, or an increase of 888k b/d. In addition, the adjustment factor once again came in at -352k b/d and accounted for -2.464 million bbls

US oil ended Wednesday’s trading session above $50 per barrel for the first time since July, driven by refinery restarts and soaring global oil demand. West Texas Intermediate crude for October delivery rose 93 cents during the day to close at $50.41 per barrel, the highest level since May 24.

On Thursday, Oil prices settled nearly flat on the eve of a meeting of major oil-producing countries in Vienna to discuss whether they will extend production limits that have helped reduce the global crude glut.

Thursday’s U.S. crude futures dipped 14 cents, or 0.3 percent, to settle at $50.55 a barrel. Brent crude futures rose 14 cents, or 0.3 percent, to end at $56.43 a barrel.

Ministers from the Organisation of the Petroleum Exporting Countries, Russia and other producers meet on Friday. They will discuss a possible extension of 1.8 million barrels per day (bpd) of supply cuts to support prices and will consider monitoring exports to assess compliance.

While many analysts expect extension of the deal beyond next March, many also said prices have risen high enough to tempt countries to boost production beyond agreed levels.

NAT GAS NEWS

Data from the U.S. Energy Information Administration on Thursday showed that domestic supplies of natural gas rose by 97 billion cubic feet for the week ended Sept. 15. Analysts and traders expected inventories to grow by 89 billion cubic feet, according to Dow Jones. Total stocks now stand at 3.408 trillion cubic feet, down 136 billion cubic feet from a year ago, but 67 billion cubic feet above the five-year average, the government said.

October natural gas NGV17, closed Thursday at $2.946 per million British thermal units.

Earlier this year, Fallin signed a bill allowing longer laterals in all geological formations in the state, not just shale. The new law allows for laterals in any target reservoir.

Fallin said the state is seeing the results.

“If you go into the areas where the Scoop and Stack is, you will see a lot of traffic, a lot of companies coming in, a lot of companies waiting for the right moment to when they [can] begin drilling,” she said.

The governor noted that during the oil bust about 75% of rigs were mothballed due to low commodity prices.

Oklahoma E&Ps are operating about 130 rigs in September up from an average of 66 rigs in September 2016, according to Baker Hughes Inc., a GE company (NYSE: BHGE).

However, the state is still averaging nearly 40% fewer rigs than it did just before the downturn. In September 2014, the state averaged 214 rigs. “The rigs are going back up,” Fallin said.

She also said Oklahoma is seeing new jobs, new investment and talk of further investments.

The state has reduced workers compensation costs by 40% in the past several years and prepared students for oil and gas jobs by emphasizing training in math and science.

Fallin said that with the Oklahoma Energy Jobs Act, which extends laterals in non-shale areas, non-shale areas will open up to more investment.

Edward L. Doheny drilled Los Angeles’s first well in 1892, and five years later there were twenty-five hundred wells and two hundred oil companies in the area. When Standard entered California in 1900, seven integrated oil companies already flourished there. The Union Oil Company was the most important of these.

For about $104 million cash, Halcón agreed to shed the rest of its nonoperated assets in the Williston Basin to a private company. Also, Halcón said it separately closed a roughly $6 million cash sale in August of additional nonoperated Williston assets to a different party.

The company’s objective through the divestment process is to transform into a pure play Delaware Basin focused company.

During a period of less than nine months, the company disposed nearly 2,000 wellbores across its assets and received total cash proceeds of more than $2bn.

Engaged in the acquisition, production, exploration and development of onshore oil and natural gas properties in the US, the company has more than 41,500 net acres in the core of the Delaware Basin.

Closing Thought: Live in such a way that you would not be ashamed to sell your parrot to the town gossip. ~Will Rogers.

Friday Snippets

Opinion: US should rethink non-energy policy to strengthen energy boomTo realize the full potential of the US energy boom, President Donald Trump should reconsider some of his non-energy policies that threaten to hurt the boom, such as the withdrawal from the Trans-Pacific Partnership, NAFTA renegotiation and exit from the Paris climate deal, writes Harvard Kennedy School professor Meghan O’Sullivan. America’s energy abundance is much more than an economic growth driver and job-creation machine as the hydraulic fracturing revolution has helped the nation become less dependent on foreign energy, revolutionized energy markets, weakened US competitors and empowered consumers, O’Sullivan writes.

New firm aims to address surging wastewater production across US shale fields

Former fund manager David Capobianco has recently launched WaterBridge Resources, a water-management company that aims to build pipelines to meet the soaring demand for wastewater disposal solutions across US shale fields and then clean and recycle the wastewater for future use. On average, wells pump seven barrels of water for each barrel of oil, but Capobianco says a network of water pipelines can help bring the cost of wastewater disposal to about $1 per barrel, down from a range of $1.50 to $2.50 per barrel currently in Texas.

Energy secretary wants to save SPR

The US needs the Strategic Petroleum Reserve to safeguard the nation’s consumers and energy infrastructure from natural disasters such as Hurricanes Harvey and Irma, Energy Secretary Rick Perry said at a news conference. Perry expressed his disapproval of President Donald Trump’s proposal to sell half of the reserve but said he hopes that Harvey and Irma will serve as a reminder of the SPR’s importance.

Trump administration presses ahead with efforts to open ANWR to drilling

The Trump administration is taking steps toward opening the Arctic National Wildlife Refuge to drilling for the first time in three decades, according to an Aug. 11 memo from US Fish and Wildlife Service Acting Director James Kurth. In the memo, Kurth orders the agency’s regional director for Alaska to eliminate restrictions on a rule that permitted exploratory drilling in the ANWR between 1984 and 1986, a move that would enable companies to submit new exploratory plans.

Environmentalists sue to prevent fracking in Nevada

The Sierra Club and the Center for Biological Diversity have filed a lawsuit against the Bureau of Land Management to stop the agency from opening federal land in Nevada to oil and natural gas drilling. The environmental groups want a judge to revoke the drilling leases BLM sold in June on the grounds that the bureau didn’t properly consider the potential effects of hydraulic fracturing.

Colonial Pipeline announced Monday that refiners in Port Arthur, Texas, could resume fuel flows into Colonial’s lines using their own pumps since the Port Arthur injection point will likely undergo repairs until the end of the month. Colonial Pipeline’s system has sustained damage due to flooding caused by Hurricane Harvey and is operating at reduced flow rates.

Resolute Energy divests Utah assets

Resolute Energy has agreed to sell its enhanced oil recovery assets in Utah’s Aneth Field to Elk Petroleum for $160 million in cash and up to $35 million in contingency payments. The sale is part of Resolute’s strategy to become a pure-play Delaware Basin operator.

US Gulf Coast refineries roar back to life after Harvey

Three weeks after Hurricane Harvey, the US Gulf Coast refining complex is gradually recovering, with 15 out of 20 affected refineries having nearly fully resumed operations, according to IHS Markit. Some 1 million barrels of refining capacity remains offline, but “steady progress appears to have been made, and the four refineries in active restart may very well be operating normally by this weekend,” IHS added.

US shale drillers to boost oil output in October

The Energy Information Administration expects US shale production to increase for the 10th consecutive month in October, climbing by nearly 79,000 barrels per day to 6.1 million barrels per day. The Permian Basin will post gains of nearly 55,000 barrels per day to 2.6 million barrels per day, output from the Bakken Shale will jump by 7,900 barrels per day to 1.06 million barrels per day, while the Eagle Ford Shale in Texas will record a 9,000 barrel-per-day decline.

Haynesville Shale drilling activity gains momentum

Natural gas production in the Haynesville Shale has reached the highest level since mid-2013, with sample production in the first two weeks of September up almost 35% from the same period a year ago to more than 3.5 billion cubic feet per day, according to Platts Analytics. The rig count in the shale play has more than tripled in the past 12 months to 44 units, and drilling activity in the region has plenty of room to expand amid surging US shale gas exports.

Analysis: US oil, gas industry to become more stable in spite of hurricanes

US oil and natural gas markets will shrug off the impacts of Hurricanes Harvey and Irma soon and move further along the path to stability and possibly modest growth this year and next, predicts energy analyst David Blackmon. The factors driving stability include surging global demand, OPEC’s limits on exports and the internal budgeting processes within mid-sized to large US producers, which suggest little-changed rig counts and levels of drilling activity for the rest of the year.

Oryx unveils plans for new Permian crude pipeline

Oryx Midstream Services plans to construct a 220-mile crude pipeline system in the Permian Basin with a transportation capacity of 400,000 barrels per day. The network will run from Carlsbad, N.M., to Crane and Midland, Texas, and is expected to be in full service by the end of 2018.

Haynesville Shale drilling activity gains momentum

Natural gas production in the Haynesville Shale has reached the highest level since mid-2013, with sample production in the first two weeks of September up almost 35% from the same period a year ago to more than 3.5 billion cubic feet per day, according to Platts Analytics. The rig count in the shale play has more than tripled in the past 12 months to 44 units, and drilling activity in the region has plenty of room to expand amid surging US shale gas exports.

Wood Mackenzie: Without innovation, Permian production could peak by 2021

September 15, 2017

IOG Capital LP announced today three new development drilling programs located in the Eagle Ford, the Merge portion of the STACK play, and the Arkoma-Woodford, respectively. These three new projects are anticipated to require up to $130 million of gross capital. These projects will be conducted through IOG’s newly formed affiliate, IOG Resources LLC (IOGR).

IOGR’s first joint development agreement was established in July 2017 with Woodlands, Texas based Earthstone Energy Inc. IOGR and ESTE will initially partner on the development of 11 Eagle Ford wells located in Gonzales County, Texas in 2017. IOGR has the potential to participate in up to 15 additional wells in the project.

IOGR’s second joint development program closed in August 2017 with an Oklahoma City based private family operator. This new development program in the Merge calls for up to 18 wells to be funded in Canadian County, OK.

The third development program closed at the end of August 2017 with Oklahoma City based Red Mountain Energy (RME). IOGR and RME will jointly fund up to 20 wells targeting the Woodford in the Arkoma Basin.

The new investments in the Merge and Arkoma-Woodford have increased IOG and its affiliates’ total acreage position in Oklahoma to over 17,000 net acres with over 80% of the position concentrated in the STACK (Dewey, Major, Kingfisher, and Blaine Counties, Oklahoma) and the Merge (Canadian County, Oklahoma). IOG now has a diversified portfolio of assets including investments in the Permian, Eagle Ford, Bakken, Marcellus, and Arkoma-Woodford areas.

Texas Frac Sand In Demand

Millions of pounds of sand are pumped down each shale well in the hydraulic fracturing process, and while Wisconsin Northern White is still dominant, it is now used in only two-thirds of US fracs. That’s a lot of displaced market share, sources told Mergermarket. Regional Texas sand mines have become an attraction as companies bank on “Permian headlines” and a diversity of sand types.

Tens of new mines are starting up in Texas and surrounding states, with sand that varies in quality but is closer and logistically simpler to procure. Vista Sand, Preferred Sands, Unimin, Black Mountain, Hi-Crush Partners, US Silica and Alpine Silica are some private and public companies with Permian Basin mines slated to be producing by the first quarter of 2018.

Those operators plan to bring at least 40 million tons of new sand supply online by the end of next year. But in an uncertain oil price environment with constantly changing demand dynamics, sources told Mergermarket they believe that at least some of the new entrants will become acquisition targets.

In conventional fields, when oil companies drill for oil, they look for oil traps. These are places where oil collects underground after seeping up through the surrounding rocks. This week brings an end to our Geology 101 series and in this final example we look at “Pinch-out Traps”.

Anticline, fault, and salt-dome traps are created by the arrangement of the rock layers, and are called structural traps. Stratigraphic traps are created by variations within the rock layers themselves. A pinch-out is a common type of stratigraphic trap. Pinch-out traps are often formed from old stream beds, where a lens-shaped region of permeable sand becomes trapped within less permeable shales and siltstones.

The U.S. Energy Information Administration (EIA) released its weekly petroleum status report Wednesday morning, showing that U.S. commercial crude inventories increased by 5.9 million barrels last week, maintaining a total U.S. commercial crude inventory of 468.2 million barrels. The commercial crude inventory remains in the upper half of the average range for this time of year.

Tuesday evening the American Petroleum Institute (API) reported that crude inventories rose by 6.2 million barrels in the week ending September 8. API also reported gasoline supplies fell by 7.9 million barrels and distillate inventories fell by 1.8 barrels. For the same period, analysts surveyed by The Wall Street Journal had consensus estimates for an increase of 3.7 million barrels in crude inventories, a decrease of 3 million barrels in gasoline inventories and a drop of 1.3 million barrels in distillate stockpiles.

Total gasoline inventories fell by 8.4 million barrels last week, according to the EIA, and remain near the upper limit of the five-year average range. U.S. refineries produced about 9.5 million barrels of gasoline a day last week, down about 1.1 million barrels compared to the prior week.

Total motor gasoline supplied (the agency’s proxy for demand) averaged over 9.9 million barrels a day for the past four weeks, up by about 400,000 barrels a day compared with the prior week.
In a report published Monday, the EIA said that gross inputs to Gulf Coast refineries fell by 34% (3.2 million barrels a day) week over week in the week ending September 1. That is the largest drop since 2008. Refinery utilization fell from 96% to 63%.

The refinery shutdowns curtailed production of refined products, but it was not the only factor contributing to higher pump prices in that week. The Colonial pipeline that carries 2.5 million barrels of refined products per day from the Gulf Coast to the East Coast operated only intermittently during Hurricane Harvey, forcing a drawdown of 2.2 million barrels in East Coast gasoline inventories.

US crude jumps to more than 6-week closing high of $49.89, as demand-driven rally continues

Oil prices rose on Thursday, a day after the International Energy Agency forecast the market would continue to tighten as fuel demand increased.

U.S. West Texas Intermdediate crude hit a intra-day, nearly four-month high at $50.50 a barrel. The contract ended Thursday’s trade up 59 cents, or 1.2 percent, at $49.89. WTI popped above its 200-day moving average level on an intraday basis for the first time since Aug. 10.

Benchmark Brent crude topped out at $55.99, the highest level since in five months. It was up 46 cents at $55.62 a barrel by 1:57 p.m. The contract remained in technically overbought territory for a second day in a row.

On Wednesday, the IEA raised its estimate of 2017 world oil demand growth to 1.6 million barrels per day (bpd) from 1.5 million bpd.

The agency said a global oil glut was shrinking thanks to strong European and U.S. demand, as well as production declines in OPEC and non-OPEC countries.

“The IEA revising up its 2017 global oil demand growth forecast, together with persistent weakness in the U.S. dollar index, has prompted bullish sentiment in the oil market,” said Abhishek Kumar, Senior Energy Analyst at Interfax Energy’s Global Gas Analytics in London.

NAT GAS NEWS

The U.S. Energy Information Administration (EIA) reported Thursday morning that U.S. natural gas stocks increased by 91 billion cubic feet for the week ending September 8. Analysts were expecting a storage injection of between 72 billion and 83 billion cubic feet. The five-year average for the week is an injection of 63 billion cubic feet, and last year’s storage injection for the week totaled 62 billion cubic feet. Natural gas inventories rose by 65 billion cubic feet in the week ending September 1.

Natural gas futures for October closed Thursday at $3.07 per million BTUs. The highest close for the previous past five trading days was registered Wednesday at $3.06. The 52-week range for natural gas is $2.80 to $3.62. One year ago the price for a million BTUs was around $3.04.

Pipeline Protest Groups Sued, Potential $1 Billion Damages

Claiming damages that could approach $1 billion, Texas-based Energy Transfer Partners (ETP) has sued Greenpeace and other protest groups in federal court in North Dakota.

Energy Partners is the company that is building the controversial Dakota Access Pipeline, which goes through Dakota Indian land where it crosses the Missouri River and was the locus of months of occupation and protest last winter. The company alleges that the groups interfered with its business, facilitated terrorism, incited violence, and violated racketeering and defamation laws,” according to an article in Insurance Journal. ETP alleges that construction disruptions alone have cost the company at least $300 million, and it is requesting triple damages.

The Anglo Persian (now Iranian) Oil Company is nationalized by the Iranian government, leading to a coup backed by the US and Britain to restore the power of the Shah (king). The coup was carried out by the U.S. administration of Dwight D. Eisenhower in a covert action advocated by Secretary of State John Foster Dulles, and implemented under the supervision of his brother Allen Dulles, the Director of Central Intelligence. The coup was organized by the United States’ CIA and the United Kingdom’s MI6, two spy agencies that aided royalists and royalist elements of the Iranian army.

US shale oil and gas investors are on a ‘road to ruin,’ warns renowned short-seller Jim Chanos – Harold Hamm Fires Back

– Renowned short-seller Jim Chanos is betting against a number of U.S. shale oil and gas drillers.
– Chanos says Wall Street is overly focused on certain valuation metrics, which hide problems with the fundamental business model in the American oil patch.
– Investors are taking for granted accounting methods that will create problems for drillers in the future, Chanos said.

Jim Chanos’ Kynikos Associates is betting against a number of U.S. shale oil and gas stocks, saying Wall Street analysis of the sector is deeply flawed.

“In our view, people have been looking at this industry through the rose-colored glasses of Wall Street, and this is the inherent problem with the North American shale business,” he said.

Chanos, who foresaw the spectacular downfall of disgraced energy titan Enron, is known for scrutinizing accounting methods and spotting trouble on the horizon. He explained why Kynikos is shorting Continental Resources during a broader presentation on the U.S. shale oil and gas industry at CNBC and Institutional Investor’s Delivering Alpha Conference on Tuesday.

Investors are overvaluing shares of Continental and other shale drillers by focusing too narrowly on certain metrics and taking for granted dubious accounting, Chanos said. He warned that their capital spending would eat up almost all of their earnings leaving them with little cash to service their debt.

Continental Resources Chairman and CEO Harold Hamm on Thursday fired back at Jim Chanos after he revealed he is betting that shares of Hamm’s Oklahoma-based drilling company will fall.

Hamm speculated that Chanos — who is known for shorting stocks, or betting that their price will decline — got caught on the wrong side of the trade and is trying to mitigate the damage by talking down shale oil drillers.

Company executives are held to a higher standard of honesty by the Securities and Exchange Commission than short-sellers like Chanos, Hamm claimed.

“For anyone to even put forth the suggestion that we haven’t had great expansion and wealth creation in this industry with horizontal drilling and all the technology that’s come about the last 10 years, I mean, it’s totally ridiculous for anybody to make those types of statements,” Hamm said.

Credit: Tom DiChristopher | CNBC | September 14, 2017 |

Closing Thought: The reason people find it so hard to be happy is that they always see the past better than it was, the present worse than it is, and the future less resolved than it will be – Marcel Pagnol.

Friday Snippets

US allows foreign fuel shipments to ease shortages during Irma

The federal government on Friday issued a Jones Act waiver that allows foreign-flagged tankers to ship fuel between US coasts in a move designed to offer hurricane-stricken states relief from fuel shortages. The waiver expires in a week.

Bill Barrett sees higher-than-expected production for the year

US shale producer Bill Barrett has lifted its 2017 oil production guidance by 4% from its initial estimate to a range between 6.4 million and 6.6 million barrels of oil equivalent in the wake of better results from its Colorado drilling program. “We remain encouraged by the early results of our enhanced completions in the Denver-Julesburg basin, which combined with faster drilling and completion cycle time allows us to deliver a higher growth profile,” Bill Barrett President and CEO Scot Woodall said.

Schlumberger enters exploration, production part of oil industry

Oilfield services company Schlumberger is investing in oil and natural gas projects to give itself a role in decisions on drilling and reduce competition for service contracts. Other companies are considering a similar approach, which increases risk but eliminates the need to bid for some jobs.

Colonial Pipeline to operate at reduced capacity

Colonial Pipeline, the biggest US fuel pipeline, will likely move fuel through its Port Arthur, Texas, pumping facility at reduced rates starting this Friday, while a full restart is expected by the end of the month. This means the Southeast and East Coast regions will face reduced fuel supplies for some time even as refineries resume operations.

Energy MLP Oasis Midstream Launches $150M IPO

Oasis Midstream Partners LP, a master limited partnership formed to operate energy assets in the Williston Basin owned by Oasis Petroleum Inc., on Monday launched an estimated $150 million initial public offering intended to support its parent company’s expansion.

US crude inventories expected to swell in wake of Harvey, Irma

The refining outages caused by Hurricanes Harvey and Irma could result in as many as 43 million barrels of crude being added to US oil stockpiles this month, according to Goldman Sachs. Additionally, US oil demand could decline by 900,000 barrels per day this month and by 300,000 barrels per day in October.

BP presses ahead with plans to spin off US midstream assets

British oil major BP on Monday filed for an initial public offering of its US midstream business, BP Midstream Partners, which will be organized as a master limited partnership and include BP’s Gulf Coast and Midwest pipeline, processing and storage assets. BP plans to launch the IPO on the New York Stock Exchange by the end of the year, aiming to raise up to $100 million.

Samson Resources to begin drilling in Wyo.’s Green River Basin

Six months after emerging from bankruptcy protection, Samson Resources is ready to launch its drilling program in Wyoming’s Green River Basin, which will include drilling five wells in Sweetwater County. Samson anticipates production of 3.7 billion cubic feet equivalent per well at a cost of $2.9 million per well, with the first sales expected in the first quarter of 2018.

EIA revises down US crude production forecast for 2017, 2018

The Energy Information Administration slashed its 2017 US oil production forecast by 100,000 barrels per day to an average of 9.25 million barrels per day and lowered its 2018 estimate by 70,000 barrels per day to 9.84 million barrels per day. Despite the downward revision, US crude production is still expected to climb to an all-time high next year, breaking the previous 9.6-million-barrel-per-day record set in 1970.

Santa Fe Midstream last month kicked off construction of a natural gas gathering, treatment and processing system in the San Andres play of the Permian Basin, with the initial gas facilities slated to come online by the second quarter of 2018. Construction on a crude gathering system in the region is also underway, the company said.

Sabinal Energy acquires Permian Basin assets from Chevron

Chevron has sold an asset package consisting of about 66,500 Permian Basin acres with production of roughly 7,500 barrels of oil equivalent per day to Sabinal Energy, a startup backed by Kayne Private Energy Income Fund, for an undisclosed amount. The sale is part of Chevron’s plan to divest between 150,000 and 200,000 net acres in the Permian Basin in 2017 and 2018.

Judge Trims Tribe’s Suit Over Okla. Fracking Approvals

An Oklahoma federal judge on Thursday trimmed a slew of claims from the Pawnee Nation of Oklahoma’s lawsuit alleging the federal government approved oil and gas leases and fracking permits on the tribe’s land without properly considering their environmental impacts.

September 8, 2017

Oil markets move little with industry in grip of Caribbean hurricanes

Reuters reports that oil prices were little changed early today as the international petroleum industry remains in the grip of Caribbean hurricanes which have pummelled the region for the last two weeks.

“The oil market was little changed, as the recovery from Hurricane Harvey stalled at the same time that Hurricane Irma threatened to disrupt the sector in Florida,” ANZ bank said.

Hurricane Harvey hit the US Gulf coast two weeks ago, knocking as much as a quarter of the country’s huge refinery industry, as a result of which demand for crude oil – refining’s lifeblood – fell sharply.

As of Thursday, about 3.8 million barrels of daily US refining capacity, or about 20 per cent, was still shut.

The US Energy Information Administration (EIA) said on Thursday that refinery utilisation rates slumped 16.9 per centage points to 79.7 per cent last week, the lowest rate since 2010.

That left a lot of crude unused, with commercial US inventories rising 4.6 million barrels last week, to 462.35 million barrels.

However, US oil production also hit, with weekly output down from 9.5 million bpd to 8.8 million bpd.

Port and refinery closures along the Gulf coast and harsh sea conditions in the Caribbean have also impacted shipping.

“Imports (of oil) to the US Gulf Coast fell to levels not seen since the 1990s,” ANZ said.

Traders said it would take weeks for the US petroleum industry to return to full capacity, and that under the current conditions it was difficult to identify fundamental market trends.

“The data for this week and next will be taken with a grain of salt as the underlying trend will be obscured by the effects of the hurricane,” said William O’Loughlin, investment analyst at Rivkin Securities.

Even as the oil industry continues to grapple with the fallout from Harvey, a much bigger Hurricane was lashing the Caribbean islands and heading for the United States.

Hurricane Irma, which has become one of the biggest storms ever measured, early on Friday was over the Dominican Republic and Haiti, heading for Cuba and the Bahamas. It was predicted to hit Florida on Sunday or Monday.

The US National Hurricane Center (NHC) said that Irma was still a Category 5 Hurricane, with wind speeds of 175 miles per hours (280 km/h).

Factoid: Geology 101 – Salt Dome Traps

In conventional fields, when oil companies drill for oil, they look for oil traps. These are places where oil collects underground after seeping up through the surrounding rocks. This weeks example is the “Salt Dome Trap”. When masses of salt form deep underground, heat and pressure cause them to bulge upward in domes. The rising domes force the overlying rock layers aside. As they do so, they can cut across layers of permeable rock, blocking the path of any migrating oil and creating an oil trap.

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EIA & API REPORT SUMMARY

U.S. Oil Stockpiles Jump One Week After Hurricane Harvey

The American Petroleum Institute (API) reported a build of 2.791 million barrels in United States crude oil inventories, compared to analyst expectations of a build of 4.022 million barrels for the week ending September 1.

Gasoline inventories fell by 2.544 million barrels for the week ending September 1, against a larger expected draw of 5.0 million barrels.

That US crude oil inventories would build in the wake of Hurricane Harvey was largely anticipated, with some saying as much as 40-60 million barrels could be added to inventory while shuttered refineries struggle to come back online.

Despite this week’s crude oil inventory build, over the last ten weeks, according to the API, crude oil inventories in the United States have shed almost 50 million barrels.

Meanwhile, on Thursday data from the U.S. Energy Information Administration showed that domestic crude supplies climbed by 4.6 million barrels for the week ended Sept. 1. That’s larger than the forecast for a rise of 2.7 million barrels by analysts surveyed by S&P Global Platts.

The build in crude inventories comes from an expected 3.3 million barrel-per-day decrease in refinery inputs during the week as refiners operated at 79.9% of their operable capacity. Hurricane Harvey at one point is said to have impacted a fifth of U.S. refinery capacity in the Gulf Coast, the nation’s refining hub.

U.S. oil prices slip with Harvey to blame for 1st U.S. crude-supply rise in 10 weeks

U.S. oil prices closed lower Thursday after the U.S. government reported the first climb for domestic crude inventories in 10 weeks, of U.S. stocks data, as Gulf storm Harvey caused refinery shutdowns in Texas, reducing demand for the commodity.

Gasoline futures eased back for a fourth-straight session, despite a hefty weekly drop in U.S. stockpiles, with refinery capacity improving as floodwaters from the storm recede.

October West Texas Intermediate crude CLV7, fell 7 cents, settling at $49.09 a barrel on the New York Mercantile Exchange. After settling Wednesday at its highest since Aug. 9, it’s still trading around 3.8% higher for the week.

November Brent crude LCOX7, meanwhile edged up by 29 cents to $54.49 a barrel on ICE Futures Europe, finishing at its highest finish since April 18.

NAT GAS NEWS

Data from the U.S. Energy Information Administration on Thursday showed that domestic supplies of natural gas rose by 65 billion cubic feet for the week ended Sept. 1. That matched the average forecast of analysts surveyed by S&P Global Platts. Total stocks now stand at 3.220 trillion cubic feet, down 212 billion cubic feet from a year ago, but 15 billion cubic feet above the five-year average, the government said.

Gasoline supplies in Texas are reported to be recovering quickly following Hurricane Harvey.
Texas Railroad Commissioner Ryan Sitton told the Associated Press this week any shortages that exist this week will be handled quickly. He also blamed the shortages on hoarding and panic buying by motorists.

Sitton reported pipelines are all operational again and supply truck companies are working overtime to move gasoline from the terminals to gas stations.

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Remember when: 2006

Chevron’s Jack 2 deepwater discovery in the Gulf of Mexico is believed to be the biggest discovery in the United States since the discovery of Prudhoe Bay.

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Williams Reports No Major Damage from Hurricane Harvey

Tulsa’s Williams Partners says its operations in the Gulf Coast area suffered no major damage from Hurricane Harvey.

The company announced Wednesday that the majority of its operations required to handle offshore production have been inspected and are “ready for service.” Some some production remains shut-in pending a pre-start test and the restart of the third-party operated Quintana Crude Oil Terminal.

The company reports some offshore production is starting to come back online. Its Transco system expects offshore production to resume in the next few days.

Transco has also not reported any operational issues but assessments are still underway. So far, the company has not reported any significant facility damage.

The gathering systems of Williams Partners in the Gulf Coast area are also ready for service and the company expects third-party producers to resume flow into the systems in the next day or so.
Williams also says it is focusing on the need of its employees who were affected by the storm. Many are being supported through the company’s emergency disaster relief fund.

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Closing Thought: “Sometimes the questions are complicated and the answers are simple.”
― Dr. Seuss

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Friday Snippets

Texas Justices Will Review Retained Acreage Split

After initially declining to hear two cases that raised the issue, the Texas Supreme Court on Friday agreed to review an alleged split among lower appellate courts about how to define the amount of property that can be released under “retained acreage” clauses in mineral leases.

Higher prices give boost to US gas production

Gross US natural gas output rebounded in June after months of lagging behind year-earlier levels, increasing 1% from May to 81.4 billion cubic feet per day, according to the Energy Information Administration. Louisiana posted the biggest growth in June — up 7.2% from May to nearly 5.7 billion cubic feet per day, while gross gas production in Texas increased 0.4% month-on-month to 21.9 billion cubic feet per day, although it was down 2.8% from a year earlier.

Harvey sets back US fracking activity

The flooding caused by Hurricane Harvey could defer up to 10% of US hydraulic fracturing activity, mainly in the Eagle Ford Shale, according to Raymond James & Associates analyst Marshall Adkins. “Given that much of oil and gas activity occurs in areas only accessible via dirt roads, the heavy rainfall usually makes the movement of trucks and supplies much more difficult,” Adkins said.

Energy Dept. OKs release of more oil from SPR

The Energy Department on Sept. 1, authorized the release of 3.5 million barrels of oil from the Strategic Petroleum Reserve, in addition to the 1 million barrels of oil approved for release the previous day, in an effort to mitigate storm Harvey’s effects on energy supplies. Marathon Petroleum will get 3 million barrels of SPR oil, while Valero Energy will receive 500,000 barrels.

Energy deal-making activity remains strong despite Harvey

US energy-sector mergers and acquisitions will likely slow down over the next month in the wake of storm Harvey, but bankers expect the impact to be temporary and foresee a rebound in deals as Houston recovers. So far this year, the oil and natural gas industry has seen nearly $97 billion worth of deals, up more than 41% from the same time last year, according to Bloomberg data.

US to become net oil exporter within 6 years, PIRA says

The US is seen becoming a net oil exporter by 2023, with net oil exports seen hitting 3.3 million barrels per day in 2031, according to PIRA Energy Group analysts. PIRA expects the US to import 4.4 million barrels per day of oil this year, down from a 2005 peak of 12.5 million barrels per day.

Fla. at risk of fuel shortages as Hurricane Irma looms

Floridians are bracing for fuel shortages as Hurricane Irma prepares to make landfall, with up to 600 gas stations in metropolitan areas of Florida reporting fuel outages on Wednesday, according to GasBuddy.com. Truckers may need to haul fuel from Georgia, Alabama, South Carolina and even Texas to ease the shortages in Florida, which has also been hit by the shutdown of terminals, pipelines and refineries along the Texas coast in the wake of Hurricane Harvey.

Hurricane Irma prompts evacuations at BP’s Thunder Horse platform

BP has begun evacuating non-essential personnel from its Thunder Horse platform and West Vela drilling rig in the Gulf of Mexico in preparation for Hurricane Irma. BP has not curbed any production yet but said it was prepared to do so if needed.

Bakken operators drilling increasingly efficient wells

The estimated ultimate recovery of the best wells drilled in the Bakken Shale has been gradually improving over the past six years, according to an analysis conducted by EnerCom Analytics. EURs climbed from 1.68 million barrels of oil equivalent in the case of the best 2012 well to a record of more than 4.5 million barrels of oil equivalent recovered by the best well drilled so far in 2017.

Bill Barrett sees higher-than-expected production for the year

US shale producer Bill Barrett has lifted its 2017 oil production guidance by 4% from its initial estimate to a range between 6.4 million and 6.6 million barrels of oil equivalent in the wake of better results from its Colorado drilling program. “We remain encouraged by the early results of our enhanced completions in the Denver-Julesburg basin, which combined with faster drilling and completion cycle time allows us to deliver a higher growth profile,” Bill Barrett President and CEO Scot Woodall said

September 1, 2017

Harvey Fallout Continues

Harvey, which brought record flooding to the U.S. oil heartland of Texas and killed at least 35 people, has paralyzed at least 4.4 million barrels per day (MMbbl/d) of refining capacity, according to company reports and Reuters estimates. Texas is home to 5.6 million barrels per day of refining capacity, and neighboring Louisiana has 3.3 million bpd.

Analysts at Goldman Sachs and Stifel said they expected U.S. infrastructure outages to last several months but said it was difficult to estimate the exact damage.

The storm has led to some of the biggest disruptions to U.S. energy infrastructure; yet it has failed to boost crude prices. The U.S. Department of Energy (DOE) reported that six refineries in the Corpus Christi area, seven in Houston/Galveston and two in Beaumont and Port Arthur are shut down and five others were operating at reduced rates.

In contrast with previous major hurricanes such as Katrina in 2005, Harvey has actually seen oil prices edge down as traders have focused more on the hit to demand from damaged U.S. refineries than the blow to supply from knocked-out production.

Analysts are divided whether demand from U.S. refineries will recover more quickly than U.S. production.

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Factoid: Geology 101

In conventional fields, when oil companies drill for oil, they look for oil traps. These are places where oil collects underground after seeping up through the surrounding rocks. This weeks example is the “Fault Trap”. Every now and then, rock strata crack and slide up or down past each other. This is known as a fault. Faults can create oil traps in various ways. The most common is when the fault slides a layer of impermeable rock across a layer of permeable rock through which oil is migrating.

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Both the U.S. Energy Information Administration and the American Petroleum Institute reported massive drawdowns in domestic crude inventories this week.
Harvey Concerns Weigh on Oil Prices Despite Bullish EIA Data

Both the U.S. Energy Information Administration and the American Petroleum Institute reported massive drawdowns in domestic crude inventories this week.

In a largely bullish Wednesday report, the EIA said commercial crude oil inventories, excluding those in the Strategic Petroleum Reserve, decreased by 5.4 million barrels during the week ended Aug. 25. At 457.8 million barrels, U.S. crude oil inventories are in the middle of the average range for this time of year. Consensus estimates called for a draw of 1.9 million barrels of crude.

Meanwhile, neither the EIA nor the API reports indicated a slowdown in refinery inputs as the data runs through the morning of Aug. 25, prior to the first landfall of Harvey.

The EIA reported that U.S. crude oil refinery inputs averaged over 17.7 million barrels per day during the past week, 264,000 barrels per day more than the previous week’s average, according to the EIA. Refineries operated at 96.6% of their operable capacity last week prior to Harvey, the agency said.

Still, more volatile inventory and refinery data is likely to come in the weeks ahead, which could be helping to keep oil prices down near term, according to analysts at energy-focused investment bank and research firm Tudor, Pickering, Holt & Co.

Hurricane Harvey, which brought record flooding to the U.S. oil heartland of Texas and killed at least 35 people, has paralyzed at least 4.4 million barrels per day (bpd) of refining capacity, according to company reports and Reuters estimates.

The shutdowns led the U.S. government to tap its strategic oil reserves for the first time in five years on Thursday, releasing 500,000 barrels of crude to a working refinery in Louisiana. Traders were also scrambling to redirect fuel to the United States.

Gasoline futures surged 10 percent on Thursday as almost a quarter of U.S. refining capacity remained offline and traders scrambled to reroute millions of barrels of fuel, while oil prices rose nearly 3 percent.

U.S. West Texas Intermediate (WTI) October crude futures recovered some early-week losses, closing up $1.27 per barrel higher at $47.23 per barrel, but posted a nearly 6% loss in August.

International Brent crude rose $1.49, or 2.9 percent, to $52.35 a barrel. The contract fell by over 2 percent during the previous session.

NAT GAS NEWS

Despite the fact that Hurricane Harvey essentially shut down 20% of natural gas production in the Gulf of Mexico, total national dry gas output still managed to expand in annual terms this week.

US Gulf of Mexico offshore natural gas output rebounded Thursday, while exports to Mexico struggled to return to normal and some midstream operators continued to report disruptions almost a week after Harvey struck Houston, according to a Thursday afternoon report by S&P Global Platts, the leading independent provider of information and benchmark prices for the commodities and energy markets.

Data from the U.S. Energy Information Administration on Thursday showed that domestic supplies of natural gas rose by 30 billion cubic feet for the week ended Aug. 25. On average, analysts were looking for a build of 29 billion cubic feet, according to a survey of analysts conducted by S&P Global Platts. Total stocks now stand at 3.155 trillion cubic feet, down 239 billion cubic feet from a year ago, but 8 billion cubic feet above the five-year average, the government said. October natural gas NGV17, fell a penny from Wednesday’s settlement to $2.929 per million British thermal units.

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Department of Energy Providing 500,000 Barrels of Crude to Cope With Harvey

The U.S. Department of Energy said Thursday that it would distribute 500,000 barrels of crude oil from the Strategic Petroleum Reserve to help the petroleum industry cope with rising fuel prices caused by disruptions from Tropical Storm Harvey, Reuters reports.

The oil will be transported to the Phillips 66 refinery in Lake Charles, LA. The plant was unaffected by the storm, which ravaged the Gulf Coast.

The delivery will include 200,000 barrels of sweet crude and 300,000 barrels of sour crude oil. Phillips 66 will be required to replace the reserves’ oil at a later date.

The Strategic Petroleum Reserve, established in the 1970s over fuel supply panics, currently contains 679 million barrels of oil.

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Remember when: 1968

Oil is found at Prudhoe Bay, northern Alaska. This becomes North America’s major source of oil. The field is an anticline structure located on the Barrow Arch, with faulting on the north side of the arch and a Lower Cretaceous unconformity on the east.

It is the largest oil field in both the United States and in North America, covering 213,543 acres and originally containing approximately 25 billion barrels of oil. The amount of recoverable oil in the field is more than double that of the next largest field in the United States, the East Texas oil field. The field is operated by BP; partners are ExxonMobil and ConocoPhillips Alaska.

A federal jury has awarded two Oklahoma oil companies $220,000 in damages from a “well-bashing” incident in 2015 by a company later bought by Devon Energy Corp.

The jury awarded H&S Equipment Inc. and Mark Holloway Inc. the damages after a two-day trial earlier this week in federal court in Oklahoma City.

The companies said a hydraulic fracturing job in the summer of 2015 on a Felix Energy LLC horizontal well near one of their vertical wells in Blaine County overpressured the well and destroyed its production. They sought damages and lost profits in excess of $1 million for subsurface trespass, creating a private nuisance and negligence.

Devon spent $1.9 billion to buy Felix Energy in late 2015, a transaction that gave it another 80,000 net acres in Oklahoma’s STACK play. It also inherited the lawsuit, which was filed against Felix in November 2015.

The jury sided with H&S Equipment and Holloway on the subsurface trespass and nuisance claims. U.S. District Judge Joe Heaton ruled Devon wasn’t negligent as a matter of law.

Devon has not said if it plans to appeal the judgment.

Credit: Paul Monies | NewsOK | Read full story: http://bit.ly/2wsTMyt

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Closing Thought: Whenever you find yourself on the side of the majority, it is time to pause and reflect. — Mark Twain

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Now This Week’s Friday Snippets

Quantum Energy Partners has formed Vitruvian Exploration IV with a $450 million commitment.

Based in The Woodlands, Texas, Vitruvian IV will acquire, develop and operate unconventional oil and gas assets in the U.S. Virtruvian IV will initially focus on the Eagle Ford Shale in South Texas.

The shutdown of about 15% of US refining capacity in the wake of Hurricane Harvey demonstrates the nation’s vulnerability to supply disruptions stemming from its dependence on fewer pieces of infrastructure that are concentrated along the Gulf Coast. There are 141 oil refineries in operation today, down from 220 three decades ago, which have nearly 30% more capacity and are being used about 90% on average, but the good news is that the market has adapted to respond more promptly to disruptions.

EnCap Flatrock plans to invest $3B in midstream space

Private equity firm EnCap Flatrock Midstream is seeking to raise $3 billion for its fourth fund, which will focus on investing in the US midstream sector, according to a person familiar with the matter. News of EnCap setting up a fourth fund comes amid surging demand for energy infrastructure projects and fierce competition for lucrative midstream deals.

South Texas shale drillers see shares plunge because of Harvey

Disruptions to oil production operations in Texas due to Hurricane Harvey are putting downward pressure on shale drillers’ shares, which have plummeted by over 7% in some cases. Shares of Eagle Ford-focused producers, such as Sanchez Energy, EP Energy and Wildhorse Resources, were the hardest hit, but larger drillers less dependent on the Eagle Ford were not spared either.

Oil, gas production in Anadarko Basin on the rise

Oil and natural gas production in the Anadarko Basin has climbed to 437,000 barrels per day and 4.9 billion cubic feet per day in July 2017, according to the Energy Information Administration. The agency, which only recently started including the Anadarko Basin in its Drilling Productivity Report, expects crude production in the region to hit 500,000 barrels per day by the end of 2018.

Harvey brings oil prices to new lows as gasoline spikes

Oil prices fell to their lowest level in more than a month on Wednesday, dragged by the storm Harvey, with October West Texas Intermediate crude ending the day down 1% at $45.96 per barrel while October Brent fell 2.2% to $50.86 per barrel. Meanwhile, gasoline continued to rally, with September futures up 5.7% to $1.885 per gallon, the highest level since July 2015.

Anadarko Sues IRS Over Refused $15.6M Loss

Oil and gas producer Anadarko sued the IRS in Texas federal court Wednesday for refusing to recognize a $15.6 million capital loss, with the company contending the agency even changed its rules that cover the deferral of such claims to block such refund requests.

Harvey sets back US fracking activity

The flooding caused by Hurricane Harvey could defer up to 10% of US hydraulic fracturing activity, mainly in the Eagle Ford Shale, according to Raymond James & Associates analyst Marshall Adkins. “Given that much of oil and gas activity occurs in areas only accessible via dirt roads, the heavy rainfall usually makes the movement of trucks and supplies much more difficult,” Adkins said.

Canadian shale producers scale back spending on weak oil prices

Canadian shale drillers such as Painted Pony Energy and Baytex Energy are following in the footsteps of their Permian Basin rivals in announcing spending cuts after frantically drilling 3,344 wells in the first half of the year, up from 1,439 a year earlier. However, Canadian shale producers may be forced to reduce drilling activity more than US frackers due to a combination of challenges such as more limited access to funding and higher operational costs due to a stronger Canadian dollar.

BHP said to enlist Barclays, Citigroup to help it exit US shale

BHP Billiton has reportedly hired Barclays and Citigroup to assist it with the planned divestment of its US shale business, valued at around $10 billion. “The sellside advisors have only invited strategic players to bid for the onshore business at this point, which is likely to be sold in separate packages, some of which will draw more interest than others,” one source said.

Preliminary data show Texas oil production rose in June

Daily crude oil production in Texas rose about 3% year-on-year to 2.51 million barrels of oil per day, according to preliminary data compiled by the Railroad Commission of Texas. For the full month, the volume of crude produced was 75.2 million barrels, which compares with a preliminary volume of 72.8 million barrels for June 2016.

August 25, 2017

Double Eagle re-forms after $2.8B Parsley sale

Fort Worth’s Double Eagle Energy is coming back to life after selling its business earlier this year to Austin’s Parsley Energy for $2.8 billion, which included a roughly 72,000-net-acre position in the Midland Basin. The transaction closed in April.

The Permian Basin-focused oil and gas explorer is again working with the Apollo Global Management private equity firm to create the new Double Eagle Energy III Holdings.

Double Eagle will continue to focus on the Permian under its old leadership team of co-chief executives John Sellers and Cody Campbell.

Double Eagle III will pursue a similar strategy to Double Eagle II, but on a “significantly larger scale and with a more substantial upfront commitment from funds managed by Apollo,” along with the management team, according to the release

“The continued strong relationships with their (Apollo) team, paired with their funds’ financial strength and track record of success allow us to aggressively pursue larger and more numerous opportunities in the most prolific basin in North America,” Campbell said in the announcement.

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Factoid: Geology 101

In conventional fields, when oil companies drill for oil, they look for oil traps. These are places where oil collects underground after seeping up through the surrounding rocks. This weeks example is the “Anticline Trap”. Oil is often trapped under anticlines—places where layers (strata) of rock have been bent up into an arch by the movement of Earth’s crust. If one of these bent layers is impermeable, the oil may ooze up underneath it and accumulate there. Anticline traps like this hold much of the world’s oil.

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Post Oak Energy pumping $100M into Eagle Ford company

Houston-based private equity firm Post Oak Energy Capital announced it’s providing $100 million to a Sierra Resources subsidiary to target dry natural gas in the Eagle Ford Shale. “(Sierra) Management has an impressive track record of investing in and operating across a number of basins across the country and is well-positioned for success in the highly economic Eagle Ford Shale play,” Post Oak Managing Director Frost Cochran said.

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EIA Reports 8th Straight Weekly Crude Draw

U.S. Energy Information Administration reported a 3.3 million barrel draw in domestic crude inventories. It was the eighth consecutive weekly stockpile drawdown.

The EIA gave the market cause for optimism by reporting not only a draw of 3.3 million barrels in crude oil inventories for the week to August 18, but also a draw in gasoline inventories, contrary to what the API had reported. Traders had expected a crude oil inventory draw of 3.5 million barrels.

“These crude draws are primarily supported by continued high refinery margins — U.S. refinery utilization was above 95% last week,” said Jeff Quigley, director of energy markets at consulting and analytics firm Stratas Advisors. “Demand expectations have improved over the last several weeks. U.S. demand has moderated, but demand for product in key markets remains strong, supporting exports.”

U.S. supply continues to grow, as well, EIA data showed. The agency said total products supplied over the past four weeks averaged over 21 million barrels per day, up by 1.4% from the same period last year.

“Crude exports also remain strong and are likely to stay strong as the Brent/WTI differential remains wide, helping to support continued inventory drawdowns,” Quigley said on Wednesday. “One key concern remains how much of an impact the re-routing of OPEC barrels to Asia (primarily by the Saudis) is having on manipulating inventory levels in the U.S.”

On Tuesday, the American Petroleum Institute reported a 3.6 million barrel reduction in oil inventories and said China’s July crude imports rose 12% year-over-year, a bullish signal for demand. The API reported an unexpected 1.4 million barrel increase in gasoline stockpiles, however.

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Oil and Gas Prices

Oklahoma crude oil prices as of 5 p.m. Thursday:
Oklahoma Sweet:

Sunoco Inc. — $43.75

Oklahoma Sour:
Sunoco Inc. — $31.75

Gulf hurricane bearish for oil prices

U.S. crude oil prices tumbled 2% on Thursday to $47.43/bbl, as pressure from the risk of weaker energy demand in the wake of Hurricane Harvey outweighed the typical price gain associated with likely production disruptions in the region.

“It’s a new world since the last storm” a decade ago, says Bob Yawger, head of the futures division at Mizuho Securities; unlike Hurricane Ike in 2008, the worry today is about the facilities that refine the oil instead of pump it, since discoveries in U.S. shale have led to more production from locations further from the coast.

According to Commerzbank, the high level of refiner activity has been the sole contributor to the drop in crude storage, as U.S. production and imports have climbed; if refiners stop processing crude, it could lead to another build up in stockpiles, a bearish factor for the oil market.

NAT GAS NEWS

U.S. supply comes in a bit smaller than expected

Data from the U.S. Energy Information Administration on Thursday showed that domestic supplies of natural gas rose by 43 billion cubic feet for the week ended Aug. 18. On average, analysts were looking for a build of 46 billion cubic feet, according to a survey of analysts conducted by S&P Global Platts. Total stocks now stand at 3.125 trillion cubic feet, down 223 billion cubic feet from a year ago, but 45 billion cubic feet above the five-year average, the government said. Prices for natural gas also got a boost from forecasts that Tropical Storm Harvey in the Gulf of Mexico may become a hurricane by Friday, which could significantly disrupt energy operations in the region.

September natural gas NGU17, closed Thursday at $2.949 per million British thermal units.

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17.6 million Americans live close to active oil or gas wells

An estimated 17.6 million Americans live within one mile of an active oil or gas well, according to a study published August 23, in Environmental Health Perspectives, a peer-reviewed journal published by the National Institute of Environmental Health Sciences. The study, by researchers at PSE Healthy Energy, a nonprofit research institute; the University of California, Berkeley; and Harvey Mudd College, is the first peer-reviewed nationwide measurement of the number of people living in close proximity to actively producing oil and gas wells.

Credit: PSE Health Energy | Read full story: http://bit.ly/2iw2bhc

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Remember when: Deepwater technology

The first offshore well out of the sight of land was drilled in 1947 in 15 feet of water (4.5 m). Just 30 years ago, deepwater operations meant exploring water depths up to 500 feet (152 m). Today a major new oil or gas floating production platform can cost billions of dollars and take up to three years to complete. Most of today’s exploration is in frontier, deepwater, and ultradeepwater areas. The challenges that have been overcome—and those that remain—in the exploitation of deepwater and ultra-deepwater reserves can be more daunting than the challenges of exploring space.

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Oklahoma energy firms ready to drill 2-mile horizontal wells

With a pair of wells in northern Dewey County, Oklahoma City-based Tapstone Energy plans to be one of the first companies to take advantage of a new law allowing horizontal wells up to two miles long.

“It means a lot to us,” said Bob Costello, Tapstone’s general counsel and vice president of land. “We’re excited to see what happens.”

Because of the emergency designation attached to Senate Bill 867, companies could begin the process of drilling long wells on Thursday.

Tapstone employees expect to file their paperwork with the Oklahoma Corporation Commission next week and plan to start drilling its first such longer wells in late October and early November, Costello said.

Closing Thought: “Never risk what you have and need for what you don’t have and don’t need.”
— Warren Buffett

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This Week’s Friday Snippets

As shale costs rise, conventional drilling makes a comeback

An increasing number of small US oil companies, particularly in California and Oklahoma, are dumping hydraulic fracturing projects in favor of conventional oil drilling as producers seek higher returns with lower risk at reduced costs compared with shale. Drilling a conventional well usually costs less than $1 million, whereas the average shale well requires between $6 million and $8 million.

Alaska’s Umiat oilfield survives against all odds

Minnesota-based Malamute Energy is determined to develop the Umiat oilfield on Alaska’s North Slope despite the risks and challenges it would face, such as the permanently frozen oil reservoir, lack of infrastructure, terrain and remoteness. Undaunted by the fact that the previous owner, Linc Energy, went bankrupt in the process of developing the Umiat and other Alaska projects, Malamute believes the prospect — estimated to hold 200 million barrels of potentially recoverable oil — could be well worth the effort.

New West Texas sand-mining capacity a game changer for Permian drillers

The planned openings of several frac sand mines in West Texas over the next 18 months are expected to give an operational and financial boost to Permian Basin producers, potentially helping them slash the cost of bringing a new well into production by 5%. This will give Permian drillers the upper hand over other regions, but it might also prompt them to boost production, worsening the supply glut and weighing on oil prices.

BHP to sell US shale assets

BHP Billiton on Tuesday announced it would sell its US shale properties after determining the assets are non-core. BHP Billiton CEO Andrew Mackenzie said several potential buyers have expressed interest in buying the assets, but he did not say how much the company wants for them.

Permian Basin land becoming a scarce resource

The Permian Basin land grab has slowed in recent months as the availability of lucrative and reasonably priced acreage shrinks and oil prices remain depressed. The number of transactions in West Texas dropped by one-third to 30 in the second quarter, while their value was down 85% to $2.8 billion compared with the first three months of the year.

The 11 biggest midstream companies in North America slashed capital spending to $29 billion in 2016 and continue to make budget cuts this year as well in a sign that the industry is going through a rough patch, according to Bain & Co. Stranded assets, the coming expiration of favorable contracts and a flood of private equity money that’s forcing firms to accept more aggressive contract terms are three trends posing risks to midstream companies’ operations and profits, Bain said.

Pioneer CEO: US emerging as swing producer in wake of 2014 price crash

The burst of innovation triggered by the 2014 oil downturn helped oil companies become more efficient, cost-effective and productive, turning the US into a “swing producer,” according to Pioneer Natural Resources President and CEO Timothy Dove. At a time when OPEC is cutting production, US oil output is on track to hit 10.7 million barrels a day by the end of 2018, which suggests that the US is filling the oil supply gap created by OPEC, and in doing so, “we’re also providing a tremendous value to the United States,” Dove said.

DOE Encouraged To Halt Expanded Natural Gas Exports

A manufacturers’ advocacy group on Tuesday urged the U.S. Department of Energy to immediately halt new liquefied natural gas exports to nations that do not have a free trade agreement with the U.S., imploring the agency to gather new data on the current policy’s potentially adverse pricing effects.

August 18, 2017

West Texas drillers again left scores of untapped wells in their wake last month as they drilled and pumped even more oil into the oversupplied market.

– Oil companies left another 135 wells dormant in the Permian Basin in July, bringing the inventory of drilled but uncompleted wells to 2,330, up 73% Y/Y – wells that could add hundreds of thousands of barrels to surging U.S. oil output when the wells are brought into production.

– “You drill, you move on, you frack [and] you get an inventory building,” Precision Dilling (NYSE:PDS) CEO Kevin Neveu says. “The shift to multi-well pads has caused an industrial inventory of uncompleted wells to accumulate. The frackers can’t keep up with the need.”

– The Energy Department expects Permian Basin production to rise by 64K bbl/day this month to 2.6M, part of the seven major U.S. shale plays that could pump 6.1M bbl/day, up by 117K bbl/day.

In 1961, DuPont™ chemist Stephanie Kwolek (b. 1923) discovered how to spin solid fibers from liquid chemicals including hydrocarbons. The resulting fibers, called aramid fibers, are amazingly tough. Aramid fibers such as Kevlar ® can be woven together to make a material that is light enough to wear as a jacket, yet tough enough to stop a bullet.

Silver Run Acquisition strikes deal for two Oklahoma energy companies

Silver Run Acquisition II, a private equity backed oil and gas startup led by the former chief executive of Anadarko Petroleum Corp, has agreed to acquire two Oklahoma energy companies.

The two companies are Alta Mesa Holdings LP, an independent exploration and production company, and Kingfisher Midstream LLC, a private midstream company whose anchor producer is Alta Mesa. Both companies are focused on the STACK play in Oklahoma.

Hackett, currently chairman and CEO of Silver Run II, will be executive chairman of the combined company. Alta Mesa executives Harlan Chappelle, Michael Ellis and Michael McCabe will continue as CEO, COO and CFO, respectively, of the combined company.

A spokesman for Alta Mesa was unavailable for comment on terms of the agreement. Silver Run said it expected the market value of the combined companies to be about $3.8 billion based on its projections of future earnings.

Alta Mesa’s core acreage position in Northeast Kingfisher County has breakevens around $25 per barrel, which Hackett called one of the lowest in the U.S. The 30-year-old company is one of the most active operators in the STACK, per the press release. It has approximately 120,000 contiguous net acres and about 4,200 gross identified drilling locations and has completed 173 of its 205 drilled wells, with 167 on production.

Well economics in Oklahoma’s Scoop and Stack plays rate second only to the Permian Basin of West Texas and New Mexico, according to analyst Housley Carr with RBN Energy. Like the Permian, the Stack and nearby Scoop shale plays are also constrained by a lack of infrastructure to deliver oil to the market.

Combining Alta Mesa with Kingfisher creates a kind of vertically integrated independent shale producer that will get first bite at the apple for space on pipelines.

EIA Crude Report

The 8.9 million barrel decrease in U.S. oil inventories is a bullish sign for an oversupplied commodity market, but was lighter than API’s Tuesday inventory report.

Data from the U.S. Energy Information Administration Wednesday showed that domestic crude supplies fell by 8.9 million barrels for the week ended Aug. 11. That’s more than double the forecast for a decline of 3.6 million barrels by analysts surveyed by S&P Global Platts.

The American Petroleum Institute had reported late Tuesday a fall of 9.2 million barrels, according to sources. Gasoline stockpiles were unchanged for the week, while distillate stockpiles climbed by 700,000 barrels last week, according to the EIA.

Oil prices finished up slightly on Thursday, after posting losses in each of the last three sessions, as traders continued to weigh data showing the biggest weekly fall in U.S. crude supplies in 11 months, but also the highest total domestic production level in more than two years.

U.S. crude production rose 79,000 barrels per day (bpd) to over 9.5 million bpd last week, its highest level since July 2015, and 12.8 percent above the most recent low in mid-2016.

On the New York Mercantile Exchange, October West Texas Intermediate crude added 30 cents, to settle at $47.24 a barrel. October Brent crude on London’s ICE Futures added 76 cents, to finish at $51.03 a barrel.

NAT GAS NEWS

The NYMEX September natural gas futures contract rose Thursday as revisions to the previous weeks’ stocks data overshadowed a larger-than-expected storage build in the most recent week.

The bearish build was above the 50-Bcf average injection for the most recent reporting week over the past five years, the first time in six weeks a build has outpaced the five-year average, according to EIA data. Because of the revision, natural gas stocks now only have a 55 Bcf, or 1.8%, cushion over the five-year average, according to EIA data. There has been sentiment in the market that a colder-than-average winter could boost prices if the surplus to the five-year average continues to dwindle.

Looking ahead, the most recent six- to 10-day weather outlook from the US National Weather Service continues to call for warmer-than-average weather across the Northeast, with the Midcontinent expected to see average temperatures.

The September contract settled at $2.929/MMBtu, up 3.9 cents from Wednesday’s close.

Citi sees oil in $40-to-$60 range for next 5 years

Oil prices will likely fluctuate between $40 and $60 per barrel through 2022, according to Citi analysts, who also said prices could fall below $40 per barrel or climb above $60 if supply disruptions worsen or improve significantly. Citi believes US shale drillers will be able to bring the market into balance in the event of supply shocks, thanks to their flexibility in oil production.

An unexpected drop of 1 million barrels a day of global production from current levels in 2018 could cause prices to jump to the $60 to $70 range.

Oil has made individuals wealthy, brought huge profits to companies, and transformed poor countries into rich ones. Right from the early days of oil in the 19th century, oil barons made fortunes almost overnight. In Baku, there was Hadji Taghiyev (1823–1924). In the US, the first oil millionaire was Jonathan Watson (1819–94) of Titusville, Pennsylvania, where Drake drilled the first US oil well. Then came the great oil dynasties of John D. Rockefeller (1839–1937) and Edward Harkness (1874–1940), and later the Texas oil millionaires such as H. L. Hunt (1889–1974) and Jean Paul Getty (1892–1976)—each acclaimed at one time as the richest man in the world. In the late 20th century, it was Arab sheikhs who were famous for their oil wealth.

Whiting sells Fort Berthold assets for $500M

Denver-based Whiting Petroleum has agreed to sell its assets in the Fort Berthold Indian Reservation area for $500 million to Calgary-based RimRock Oil & Gas which is backed by private equity firm Warburg Pincus.

The sale will include almost 30,000 net acres, 29 non-op units, and 17 operated units in the play. Net daily production from the properties averaged 7785 barrels of oil equivalent per day in the second quarter of 2017. This represents about 7% of Whiting’s total production in the second quarter of 2017.

The sale is expected to provide Whiting additional liquidity to develop its industry leading properties across the Williston basin, where the company estimates it has 4,850 future drilling locations.

Whiting also plans to use proceeds from the sale to repay $500 million of its current $550 million in bank debt. The sale is expected to close on September 1st, 2017.

Closing Thought: “Good friends, good books, and a sleepy conscience: this is the ideal life.”
― Mark Twain

Friday Snippets

Permian drillers embrace multiwell pads to improve efficiency

Despite recent spending cuts announced by major shale producers, many Permian Basin drillers will be able to maintain or even exceed production targets for the year thanks to more efficient drilling processes such as multiwell pads, high-spec rigs and longer laterals. “Pad drilling offers numerous benefits, including reduced drilling cycle times and smaller surface footprints with the possibility for increased frac efficiencies and simultaneous operations,” energy consultancy Westwood Global Energy Group said.

Noble Energy finds solution to West Texas trucking bottlenecks

Noble Energy has launched the first of four planned central gathering facilities in the Delaware Basin portion of the Permian Basin in a bid to cut costs and reduce its need for trucks to transport oil and water to collection points. The average oil well in the Delaware Basin needs about 1,800 truck trips, whereas a centralized gathering system will allow Noble to improve capital and operational efficiency and become more flexible, all while eliminating the risks and shortcomings associated with trucking.

Cabot Oil & Gas is looking for asset deals to consolidate its business and may consider divesting its Marcellus Shale properties because there are “limited” options for purchasing overlapping acreage in the area. “This tremendous asset, as it moves into maturity, makes sense as part of a larger portfolio, either one we own, or one that we don’t own, for other like, high-quality-grade assets,” Cabot Executive Vice President and Chief Financial Officer Scott Schroeder said.

Colo. county could see 216 new oil wells by 2019

Boulder County, Colo., could see 216 new oil wells by 2019 if a bid by Crestone Peak Resources is accepted. The final version of the proposal could be approved by the state Oil & Gas Conservation Commission by March 2018.

US shale gas production poised to soar in Sept.

The Energy Department predicted that US shale natural gas output in September will climb by 12%, to 59.4 billion cubic feet per day, compared with 53 billion cubic feet per day forecast for August. The increase is due to the fact that the federal government for the first time will include output from the Anadarko Basin in its shale gas estimates.

Texas oil, gas firms applying for permits at unprecedented pace

The Railroad Commission of Texas granted 1,011 original drilling permits last month — nearly double the 631 permits issued in July 2016 — of which 893 permits were for new oil and natural gas wells. Production from the Permian Basin is seen increasing by 2.5% to 2.5 million barrels per day from July, according to the Energy Information Administration, although productivity is declining because producers are drilling but not completing wells.

Permian drillers keep adding to backlog of untapped wells

The number of drilled-but-uncompleted wells in the Permian Basin climbed by 135 last month to 2,330, 73% more compared with July 2016, according to the Energy Department. With the average Permian well producing about 400 barrels of oil per day, these untapped wells could boost US oil production by hundreds of thousands of barrels per day once they come online.

New frac sand mining capacity in Texas to help drillers slash costs

Permian Basin drillers could see logistics costs drop by as much as 40% as the planned construction of several frac sand mines in West Texas means hydraulic fracturing in the area will no longer depend on expensive rail transportation to bring sand from Wisconsin. Oil companies pay up to $140 to have a ton of sand shipped by rail to West Texas, but that cost could drop to $85 per ton once producers will be able to buy sand from local mines and haul it by truck, according to IHS Markit.

Permian Basin land becoming a scarce resource

The Permian Basin land grab has slowed in recent months as the availability of lucrative and reasonably priced acreage shrinks and oil prices remain depressed. The number of transactions in West Texas dropped by one-third to 30 in the second quarter, while their value was down 85% to $2.8 billion compared with the first three months of the year.

August 11, 2017

Mineral Rights Start Gushing Cash for Colleges

The resurgence of oil and gas exploration in Oklahoma has turned out to be a surprising source of new revenue for the University of Oklahoma.

As Bloomberg News reported recently, the university has been the recipient of millions of dollars from mineral rights on land given to the school decades ago. Until recently, the mineral rights didn’t produce much. Now they are.

A lot of it is coming from the late OU alumnus Henry Mosier and his wife Ida Mosier. Initially, the land and mineral rights produced about $30,000 a year.

In 2014, it produced $2.35 million all because it’s located in Kingfisher county, one of the three main counties that make up the STACK, one of Oklahoma’s hottest oil and gas plays.

FourPoint Energy LLC has drilling rigs ready to go in western Oklahoma, waiting to drill horizontal wells up to two miles long beginning Nov. 1 when the new state law allowing the process becomes effective.

“This is going to be huge for us,” Steve Goodwin Jr., FourPoint’s vice president of operations, said at the Tri-State Oil and Gas Convention in Woodward on Thursday.

“Longer laterals make more wells economic. This adds jobs. This adds investment. It will mean big things for you in the future.”

The 6.5 million barrel decrease in U.S. oil inventories is a bullish sign for an oversupplied commodity market, but was lighter than API’s Tuesday inventory report.

U.S. crude oil inventories fell by 6.5 million barrels to 1.15 billion barrels while gasoline inventories rose 3.4 million barrels to 231.1 million barrels in the week ended Aug. 4, the Energy Information Administration reported Wednesday. Data from the American Petroleum Institute late Tuesday also showed that crude inventories fell 7.8 million barrels, while gasoline inventories increased 1.5 million barrels during the week.

U.S. crude oil imports, meanwhile, averaged about 7.8 million barrels per day last week, down by 491,000 from the previous week, the EIA noted. Over the past four weeks, crude oil imports averaged over 8 million barrels per day, 4.9% below the same four-week period last year.

Oil prices fell more than 1.5 percent on Thursday, as a bruising day on Wall Street bolstered fears of slowing demand amid lingering concerns over a global oversupply of crude.

U.S. West Texas Intermediate crude CLc1 settled down 97 cents or 1.96 percent to $48.59 a barrel. It appears $50 seems to be a formidable foe for the crude bulls.

Brent crude futures LCOc1 were down 80 cents or 1.52 percent to $51.90 a barrel.

Crude prices are down nearly 7 percent so far this year, pressured by concern that output cuts by OPEC and its partners may not eliminate the global crude glut.

NAT GAS NEWS

Elsewhere on Nymex, prices for natural gas ended at their highest level in three weeks following data from the U.S. Energy Information Administration Thursday that showed domestic supplies of natural gas rose by 28 billion cubic feet for the week ended Aug. 4.

On average, analysts were looking for a build of 37 billion cubic feet, according to commodity brokerage firm iiTRADER.

September natural gas NGU17 added 10.2 cents, or 3.5%, to settle at $2.985 per million British thermal units—the highest since July 20.

In the energy industry, Hilcorp has built a reputation for fast growth, big profits and making people rich. This 28-year-old Houston-based company has kept a low public profile while becoming one of the top five privately held oil and gas producers in the United States.

Hildebrand founded Hilcorp in 1989, when he was about 30 years old. He had a bit of experience working at Irving-based Exxon Mobil Corp., a recent master’s degree in petroleum engineering from the University of Texas at Austin — and a plan. The company would buy older oil and gas fields with declining output and squeeze more out of them using the latest drilling methods.

Paul Neal “Red” Adair (1915–2004) was world-renowned for his exploits in fighting oil-well fires. The Texan’s most famous feat was tackling a fire in the Sahara Desert in 1962, an exploit retold in the John Wayne movie Hellfighters (1968). When oil wells in Kuwait caught fire during the Gulf War of 1991, it was the veteran Red Adair, then aged 77, who was called in to put them out.

BP Announces Discovery of Massive Gas Well in New Mexico

BP claims the area around Farmington, New Mexico is a significant new source of natural gas for the country. The Houston, Texas company announced it “has brought online a highly productive natural gas well in the Mancos Shale.”

It said the early production rates at the NEBU 602 Com 1H well in San Juan County are the highest achieved in the past 14 years within the San Juan Basin. The Basin spans southwest Colorado and northern New Mexico. The well had an average 30-day initial production rate of 12.9 million cubic feet a day.

As a result of the major find, BP Lower 48 plans to open a new headquarters office in Denver in 2018 so it can be closer to most of its operated oil and natural gas production assets in the Rocky Mountain region.

Closing Thought: When performance is measured, performance improves. When performance is measured and reported, the rate of improvement accelerates.

Friday Snippets

Permian shale companies face doubts from investors

Stock prices for several shale companies that operate in the Permian Basin decreased last week, raising speculation that investors are skeptical of continued production increases in the region. “The Permian is going to have some growing pains,” said Scott Hanold of RBC Capital Markets.

Apache reports profit, expects production increase

Apache, which has developed the Alpine High oil and natural gas field in West Texas, posted $572 million in profits in the second quarter, marking the second-consecutive profitable quarter, the Houston-based company reported. “We expect continued production volume increases at Alpine High and in the Midland Basin, as well as from our international regions during the second half of 2017,” President and CEO John Christmann said.

Dallas Fed: Texas drilling may slow even as oil prices rise

Drilling activity in Texas could flatline in the second half of 2017 because the pace of growth might be unsustainable even though oil prices are seen edging closer to $60 per barrel by year’s end, according to the Federal Reserve Bank of Dallas. “The main risk factors going into the second half of the year continue to be a sharp decline in energy prices and uncertainty regarding trade and tax policy,” the bank said.

No Need For New Trial In Gas Royalty Row, Driller Says

Southwestern Energy Corp. on Friday urged an Arkansas federal judge to let stand a jury verdict favoring the natural gas developer in a class action claiming it violated lease provisions in order to scam royalty owners, blasting the royalty owners’ arguments that the trial was fatally flawed.

A shortage of heavy crude supplies is forcing US refiners, including Valero Energy and Phillips 66, to run more light, sweet crude instead, a shift that’s putting pressure on their profit margins due to the higher cost of light crude. This switch comes in response to weak supplies from Venezuela as well as higher prices for heavy crude from Russia and lower production from Canada.

Marathon to produce more oil, trim spending, CEO says

Marathon Oil says it plans to sell oil from more wells during the second half of the year after making drilling improvements in areas such as Oklahoma and North Dakota. The Houston-based company also plans to cut spending by 10% because of low oil prices, President and CEO Lee Tillman said.

Noble Energy plans increase in oil production

Oil drilling in Colorado’s Denver-Julesburg Basin and West Texas’ Delaware Basin will allow Noble Energy to increase its production by 40% this year, the company says. In addition, the Houston-based company plans to increase spending at its Leviathan project off Israel’s coast.

BP makes major N.M. shale gas find

British oil major BP believes it has discovered a potential new prolific source of shale gas in New Mexico after one of its gas wells in the San Juan Basin’s Mancos Shale exceeded expectations. The well achieved an average 30-day initial production rate of 12.9 million cubic feet per day of gas — the highest production rate in the region in 14 years, according to BP.

Concho Resources expands Permian footprint

Concho Resources has paid $600 million in cash for about 12,400 net acres in the Midland portion of the Permian Basin. The asset package, acquired from an unnamed seller, includes land in Texas’ Andrews and Martin counties and 3,000 barrels of oil equivalent per day in legacy production.

Alternatives could eliminate water use in fracking, report says

A report from the EU’s Joint Research Center Institute for Energy and Transport reviews several potential methods for reducing or eliminating the use of water in the hydraulic fracturing process. Among the possibilities are foams, cryogenic fluids, plasma stimulation and fracturing technology, thermal fracturing and enhanced bacterial methanogenesis.

Chesapeake to scale back drilling activity this year

Despite posting better-than-expected profits, US shale producer Chesapeake Energy said it would cut its rig count from 18 now to 14 by year’s end and bring 250 wells into production in the second half of 2017, 10 fewer than initially planned. “We suspect Chesapeake may cut back activity in the relatively gassy North Eastern Appalachia, Haynesville and (to a lesser extent) Midcontinent regions,” Barclays analysts said.

Permico Energia looks to build $1.8B Texas pipeline

Permico Energia of Texas is looking to construct a 510-mile pipeline that would be able to transport 330,000 barrels per day through portions of Texas. The $1.8 billion project is set to begin in late 2020 and would also have a storage facility that could hold 8 million barrels, according to company CEO Jeffrey Beicker.

August 4, 2017

SandRidge News

SandRidge Energy (NYSE:SD) reports Q2 earnings of $0.23/share compared to a $0.03 net loss in the year-earlier quarter and raises its full-year production guidance after securing as much as $200M in funding to drill wells in Oklahoma’s STACK play.
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The Oklahoma City-based company said the joint agreement with an unnamed private investment fund will target the Meramec formation in Major and Woodward counties. The private investment fund will provide $100M initially to drill the wells, with an option for a second $100M tranche; the fund will cover 90% of the drilling costs and receive an 80% working interest in the wells.
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SD says the agreement will allow it to drill 34 Mid-Continent laterals in 2017, up from previous guidance of 22. SandRidge announced it had raised the company’s total capital expenditure budget by $40 million to a range of $250 million to $260 million to accommodate opportunities in both Colorado’s Niobrara field and in Oklahoma’s STACK play.

Factoid: The Diesel engine is named after the inventor, not the fuel and the original fuel it was developed to run on was peanut oil in 1895.

EIA Report

EIA: US crude inventories drop for 5th straight week

The U.S. Energy Information Administration (EIA) released its weekly petroleum status report Wednesday morning, showing that U.S. commercial crude inventories dropped by 1.5 million barrels last week, maintaining a total U.S. commercial crude inventory of 481.9 million barrels. The commercial crude inventory remained in the upper half of the average range for this time of year.

For the past week, crude imports averaged about 8.3 million barrels a day, up by 209,000 barrels a day compared with the previous week. Refineries were running at 95.4% of capacity, with daily input averaging 17.4 million barrels a day, about 123,000 barrels a day more than the previous week’s average. Analysts were looking for refinery usage of 94.4% for the week.

EIA: Nat Gas

The U.S. Energy Information Administration said in its weekly report that natural gas storage in the U.S. rose by 20 billion cubic feet in the week ended July 28, just below forecasts for a build of 21 billion.

That compared with a gain of 17 billion cubic feet in the preceding week, a withdrawal of 6 billion a year earlier and a five-year average rise of 44 billion cubic feet.

Total natural gas in storage currently stands at 3.010 trillion cubic feet, according to the U.S. Energy Information Administration, 8.5% lower than levels at this time a year ago but 2.9% above the five-year average for this time of year.

Both Brent and WTI are down more than 9 percent since the start of the year and close to 20 percent over a 12-month period.

Oil futures gave up early gains to trade lower Thursday afternoon, as buying appetite faded and as investors awaited a highly anticipated OPEC meeting next week.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in September CLU7, +0.10% fell 56 cents, or 1.1%, at $49.03 a barrel, after trading as high as $49.96 during the session.

Analysts said prices were pressured by rising output, although strong demand limited the losses. “Increasing OPEC production and increasing OPEC exports are the reason the market has been trading lower,” said PVM Oil Associates analyst Tamas Varga.

In the United States, oil production has hit 9.43 million bpd, the highest since August 2015 and up 12 percent from its most recent low in June last year.

Investors will be watching the U.S. rig count expected later today to assess any signs of a slowing down in drilling activity.

NAT GAS Prices

Natural gas futures for September delivery closed on Thursday, down slightly at $2.80 per million BTUs. The highest close for the past five trading days was registered last Thursday at $2.97. The 52-week range for natural gas is $2.76 to $3.60. One year ago the price for a million BTUs was around $3.09.

Tulsa, Oklahoma-based Samson Resources II LLC has agreed to sell its assets in East Texas and North Louisiana to an affiliate of Houston-based Rockcliff Energy II, LLC for $525 million.

The transaction, which is expected to close in September, comes shortly after Samson emerged from bankruptcy as the successor to Samson Resources Corp. on March 1. The company eliminated $4 billion of debt through the Chapter 11 process earlier this year.

In May, Samson announced it had retained investment banks Jeffries LLC and Houlihan Lokey Capital Inc. to sell all of the company’s East Texas and North Louisiana assets.

Proceeds from the Rockcliff deal will pay down all of the debt remaining under Samson’s senior secured revolving credit facility. The rest of the proceeds will be used for Samson’s capital needs in 2018 and a possible distribution to equity investors. In addition to the Rockcliff deal, Samson has divested roughly $14 million worth of noncore assets and equipment since March 1 of this year.

Once the deal closes, Samson plans to focus on its oil and gas assets in the Powder River and the Green River Basins of Wyoming.

Remember when: 1859

The first oil corporation, which was created to develop oil found floating on water near Titusville, Pennsylvania, was the Pennsylvania Rock Oil Company of Connecticut (later the Seneca Oil Company).

The energy company reported $0.43 earnings per share (EPS) for the quarter, missing analysts’ consensus estimates of $0.44 by $0.01. The firm had revenue of $402 million during the quarter, compared to analysts’ expectations of $413.70 million. Newfield Exploration had a negative net margin of 28.60% and a positive return on equity of 33.87%. The firm’s revenue for the quarter was up 5.5% on a year-over-year basis. During the same quarter in the previous year, the firm posted $0.32 EPS.

Newfield Exploration has drilled some monster STACK wells this year, including its Burgess well, which delivered a record oil rate for a well of its size. These highly productive wells enabled the company to produce 139,000 BOE/d in the U.S. last quarter, which was 6,000 BOE/d ahead of the mid-point of its guidance range.

Oklahoma’s shale plays have become an important growth driver for the oil industry over the past year. At some point, the improving results of the area should cause the market to recognize that these E&P’s are sitting on a gold mine, which could help reverse the nearly 30% slide they’ve taken this year.

Chesapeake Energy swung to a second-quarter profit on a boost in in energy production and said it expects production to continue rising throughout the year. Still, the natural gas company plans to cut four rigs by the end of the year as it continues to rein in expenses.

The Oklahoma City, company earned $470 million, or 47 cents per share, compared with a loss a year ago. Earnings, adjusted for non-recurring gains, were 18 cents per share.

Chesapeake Energy Corp. is operating 18 rigs and expects to cut that down to 14 rigs by the end of 2017. A lingering decline in energy prices has prompted Chesapeake and its peers to cut rigs and costs.

Closing Thought: Life can only be understood backwards; but it must be lived forwards.

Friday Snippets

US oilfield servicers planning further fee hikes

US oilfield service providers are confident about their prospects in the second half of the year and see enough room to raise fees even though activity isn’t expected to surge considerably. Drilling contractor Helmerich & Payne sees oil prices holding below $50 per barrel for the rest of the year, but President, Director and CEO John Lindsay suggested that this won’t affect the company’s ability to raise rig lease rates.

US energy dealmaking activity holds steady

The pace of US oil and natural gas mergers and acquisitions slowed down in the first half of 2017, but the level of activity was still the highest in eight years, fueled by the upstream sector, according to PricewaterhouseCoopers. US oil and gas companies struck $110 billion worth of deals in the first six months, up from $54 billion in deals in the same period of 2016, with the Permian Basin and the Marcellus and Utica shale plays at the center of attention.

EQT shelves Utica drilling program in favor of Marcellus

US natural gas producer EQT has announced that it’s suspending its Utica Shale drilling program as it doubles down on the Marcellus Shale. EQT said its $6.7 billion merger with Rice Energy would enable it to drill Marcellus wells with better returns than the average Utica well.

Permian drillers lock in $50 per barrel for most remaining 2017 output

Permian Basin drillers have secured prices of $50 per barrel for 65% of the oil they plan to produce for the rest of the year and also hedged 50% of remaining natural gas production at $3 per thousand cubic feet, according to IHS Markit. By comparison, producers outside the Permian have only hedged 19% of oil production and 29% of gas production in 2017.

More US shale drillers announce spending cuts

Several US shale producers, including Hess, ConocoPhillips, Whiting Petroleum and Anadarko Petroleum, announced cuts to their 2017 drilling budgets this week as drillers and investors alike start prioritizing financial discipline over production growth. “This is the right approach for value creation in the upstream sector, especially at a time of uncertainty in the commodity markets,” ConocoPhillips Chairman and CEO Ryan Lance said.

Cheniere’s 4th liquefaction plant reportedly begins operations

A fourth liquefaction plant at Cheniere Energy’s Sabine Pass terminal in Louisiana has begun producing liquefied natural gas and is expected to become fully operational by year’s end, according to a source. The new plant will help Cheniere achieve its goal of doubling export capacity this year.

Penn Virginia pays $205M for Devon Energy’s Eagle Ford assets

Penn Virginia has agreed to acquire 19,600 net acres in the Eagle Ford Shale in south Texas from Devon Energy in a deal worth $205 million. The assets, located in Lavaca County, produce about 3,000 barrels of oil equivalent per day, helping increase Penn’s output by nearly a third.

Wofcamp Water Partners to serve Delaware Basin drillers

Wolfcamp Water Partners has leased 31,000 acres in West Texas and plans to pump about 200,000 barrels of water per day from the Capitan Reef aquifer — becoming the third company looking to supply water to hydraulic fracturing operations in the Delaware Basin. Wolfcamp Water aims to recover just 2% to 3% of the roughly 55 billion barrels its lease holds over the next two decades.

Study measures economic impact of US oil, gas industry

The US oil and natural gas industry supported 10.3 million jobs and contributed $1.3 trillion to the nation’s economy in 2015, according to a study conducted by PricewaterhouseCoopers for the American Petroleum Institute. The biggest beneficiaries were Texas, with nearly 2 million jobs linked to oil and gas operations and $326.3 billion in added value, followed by California with 730,600 jobs, Oklahoma with 379,100 jobs and Pennsylvania with 322,600 jobs.

Oil hedging activity surges as oil prices inch higher

US shale producers are hedging again after a two-month break as West Texas Intermediate closes in on $50 per barrel, with some locking in prices as low as $45 per barrel for their 2018 production, according to BNP Paribas and PVM Oil Associates. “The improving price backdrop has provided US producers with a timely opportunity to lock in selling prices for future production that will help safeguard the US shale boom,” PVM analyst Stephen Brennock wrote.

Big data helps EOG Resources identify drilling prospects

US oil and natural gas producer EOG Resources is harnessing the power of big data to optimize oil and gas exploration and identify the best drilling locations. “Our multi-decade database and learning curves gives us a huge advantage in identifying the best rock to add new and better drilling potential to the company,” said EOG Chairman and CEO Bill Thomas.

Vanguard Natural Resources completes restructuring

Houston-based natural gas producer Vanguard Natural Resources has successfully completed financial restructuring under Chapter 11 bankruptcy protection, shedding $820 million in debt and entering into an $850 million revolving credit facility. However, the company still has $936 million in debt and just $17 million in liquid assets.

Drilling frenzy may be doing more harm than good to US shale fields

In their rush to boost production, US shale drillers may inadvertently cause long-term damage to assets by drilling new wells too close to existing ones, causing production from legacy wells to decline or stop altogether. Data from the Energy Information Administration show that decline rates have risen sharply since 2012, particularly in the Permian Basin, and now output from legacy wells is plunging by 350,000 barrels per day.

July 28, 2017

Exxon Mobil shares fall 2% as profits double, but still fall short of Street expectations

Shares of Exxon Mobil on Friday reported quarterly earnings that fell slightly short of analysts expectations but nevertheless doubled from the same period last year.

Shares of Exxon were trading down 2 percent in pre-market trading.

The oil major earned $3.4 billion, or 78 cents a share in the second quarter, $1.7 billion, or 41 cents a share, in the year ago period.

Analysts had expected Exxon to to post earnings of 84 cents a share on $61.9 billion in revenue.

Factoid: Liquefied natural gas (LNG) is made when natural gas is cooled to temperature of minus 260 Fahrenheit (-162 Celsius). When it becomes liquid its volume is reduced 615 times, which can be done by cooling the gas.

EIA Report

EIA: US crude inventories drop for 4th straight week

US crude stockpiles posted a decline of 7.2 million barrels in the week ended Friday, surpassing expectations for a 2.5-million-barrel drop and marking the fourth consecutive week of declines, according to the Energy Information Administration. Gasoline and distillate inventories plunged by 1 million barrels and 1.9 million barrels, respectively.

EIA: Nat Gas

The U.S. Energy Information Administration reported Thursday that domestic supplies of natural gas rose by 17 billion cubic feet for the week ended July 21. Analysts surveyed by S&P Global Platts forecast a build of 22 billion cubic feet. Total stocks now stand at 2.990 trillion cubic feet, down 302 billion cubic feet from a year ago, but 111 billion cubic feet above the five-year average, the government said.

Oil prices closed up Thursday reaching fresh two-month highs and on track to post the strongest weekly gains this year as investors digested signs of an easing oversupply picture.

U.S. crude and gasoline inventories fell much more steeply than expected this week and the world’s biggest oil exporter Saudi Arabia said it would further reduce oil output in August.

Despite these signs, analysts’ assessments of the oil market remained bearish.

Brent crude futures were up 52 cents closing at $51.49 a barrel after reaching a high for the day of $51.64 a barrel. The front of the crude oil curve jumped into backwardation, with the month-ahead trading above the subsequent month, showing investors are not expecting recent gains to last.

U.S. West Texas Intermediate (WTI) crude futures closed up 29 cents at $49.04 a barrel, near a two-month high of $49.24.

Investors will be watching the U.S. rig count expected later today to assess any signs of a slowing down in drilling activity.

NAT GAS Prices

Natural gas futures for September delivery closed slightly up at $2.96 per million BTUs. The highest close for the past five trading days was registered last Thursday at $3.03. The 52-week range for natural gas is $2.80 to $3.60. One year ago the price for a million BTUs was around $3.01.

– Goldman Sachs said it remained cautiously optimistic on oil prices, despite the rebound over the past month

– Supportive factors included stock drawdown, falling U.S. rig count and robust demand, it said

– But too large a price recovery will increase downside risk as shale production can ramp up rapidly, it added

The rebalancing in the oil market is accelerating, said Goldman Sachs in a note on Thursday.

“While OPEC’s production path remains uncertain, recent fundamental oil data have come in even better than we had expected,” Goldman said. “If sustained, these trends would help achieve the normalization in inventories by early next year.”

Oil prices have rebounded over the past month due to large inventory draws, falling U.S. rig count and strong demand demand data, with prices rising above Goldman’s September 2017 forecast of $50 a barrel Brent, the investment bank noted.

Texaco, Incorporated, known for many years as the Texas Company, was founded in 1902 at Beaumont by oilman Joseph S. Cullinanand New York investor Arnold Schlaet. Capitalizing on its strong brand identity, in May 1959 the Texas Company changed its name to Texaco, Incorporated. The brand-name Texaco was a shortened cable-address for the Texas Company.

More CAPEX Cuts Around The Corner?

This week, Anadarko Petroleum became the first large U.S. oil company to slash its spending plans for 2017 in response to the most recent plunge in oil prices. After reporting a second quarter net loss of $415 million, Anadarko said that it would rein in its capital expenditures for the rest of the year. “The current market conditions require lower capital intensity given the volatility of margins realized in this operating environment. As such, we are reducing our level of investments by $300 million for the full year,” Al Walker, Anadarko Chairman, President and CEO, said in a statement.

More drillers could follow Anadarko’s lead, paring back drilling plans amid more modest expectations for a recovery in oil prices. Whiting Petroleum Corp., a major producer in North Dakota’s Bakken shale play, said on Wednesday that it is slashing its 2017 budget by 14 percent.

The decision by Anadarko, though, to slash its spending budget is one sign that oil companies are responding to weaker prices. It should be noted that Anadarko’s spending cuts are largely related to its international programs, rather than shale drilling specifically. However, the newfound caution could offer a path forward for struggling oil companies.

A new report from Wood Mackenzie finds that even some of the largest shale players won’t be cash flow positive until 2020.

Closing Thought: The only person you should try to be better than is the person you were yesterday.

Friday Snippets

US oil industry pushes back against “Buy American” policy

US oil and natural gas companies and the US Chamber of Commerce have stepped up cautioning against President Donald Trump’s plan to require new pipeline projects to use US-produced steel and components. The oil industry argues that the “Buy American” requirement would lead to construction delays, higher costs and fewer new projects, which would prevent the US from achieving energy dominance and significant economic and job growth.

Quanta Services buys Stronghold in $550M deal

Quanta Services, an infrastructure services provider for the oil and natural gas, electric power and telecom industries, has bought Stronghold, which provides downstream and midstream services. The deal, worth up to $550 million in cash and stock, will help Quanta expand its footprint in the energy industry.

US shale propels Schlumberger’s Q2 revenues

Schlumberger, the world’s No. 1 oilfield services company, has seen its North American onshore revenue climb by 42% in the second quarter, fueled by a 68% increase in its US revenues from hydraulic fracturing. “While the activity outlook in North America for the second half of the year remains robust, we are now also seeing more positive signs in the international markets with increases in activity,” Schlumberger Chairman and CEO Paal Kibsgaard said.

Engineers recommend well spacing, design plan in Eagle Ford Shale

Proper well spacing and design are critical in the development of unconventional reservoirs in the Eagle Ford Shale in Texas, engineers say. They recommend drilling a child well 600 feet from the parent well, drilling in-fill wells and vertically staggering wells when virgin reservoirs are involved.

QE Resources divesting Wyo. natural gas assets

QEP Resources has agreed to sell its Wyoming natural gas assets, which produced 234 million cubic feet per day in the first quarter, to Pinedale Energy Partners in a deal worth roughly $740 million. The sale comes as QEP shifts its focus to the Permian Basin, where it plans to spend $600 million on acreage.

Renewed shale boom driving frac sand demand to new records

US demand for frac sand will likely hit a record of 73 million tons in 2017, 30% more than a 2014 peak of 56 million tons, according to Credit Suisse. The main demand drivers are the growing completions activity and higher completions intensity, which means that each well completed in 2017 takes in nearly 4,200 tons of sand on average.

Natural gas drillers rush to complete wells as prices spike

US natural gas producers in the Northeast are bringing wells online at an unprecedented pace, causing the backlog of drilled-but-uncompleted wells in the Marcellus Shale to drop to 643 in June, down from 831 in July 2015. The surge in completion activity can be attributed to higher gas prices as well as new pipelines coming into service.

US shale producers’ margins under pressure as costs rise

Higher services, labor and materials costs for shale producers threaten to bring the US shale drilling boom to a halt unless oil prices rise or drillers find innovative ways to deal with these challenges, Spencer Jakab writes. While producers’ margins are under pressure, business is booming for oilfield servicers, which are better positioned to profit from the shale rebound.

No end in sight to US oil export boom, analysts say

US export volumes of petroleum products are on track to break last year’s record of 2.5 million barrels per day in 2017, fueled by growing demand from Latin America as well as Europe and Asia. PIRA Energy has predicted that US exports of transport fuels would jump 8.8% in 2017, bolstered by refinery challenges and high production costs in countries such as Mexico and Venezuela.

Another frac sand mine to be built in Permian Basin

Badger Mining is the latest frac sand mining company planning to build a facility in West Texas’ Permian Basin as it seeks to capitalize on the surging demand for sand in the region. The mine, to be located north of Kermit, Texas, is estimated to hold more than 35 years of sand reserves and will produce 3 million tons of sand per year.

SEC Says Citadel Energy Founder Ran $15M Investor Scheme

The U.S. Securities and Exchange Commission alleged in California federal court Wednesday that the founder of Citadel Energy Partners LLC ran a $15 million investment fraud scheme that paid for some of his personal expenses, including Ponzi-like payments and expensive psychic readings.

July 21, 2017

Viper Spends $270 Million In Permian

Viper Energy Partners LP (NASDAQ:VNOM) a subsidiary of Diamondback Energy, Inc. (NASDAQ:FANG) announced that they plan to release second quarter 2017 financial results on August 1, 2017 after the market closes.

Viper Energy Partners LP (VNOM) surprised the stock market in its last reported earnings when it earned $0.22 a piece versus the consensus-estimated $0.19. Its revenue totaled $29.52 million up 5.73% from the previous quarter. Analysts expect next quarter’s EPS will be $0.24 and the next full year EPS is anticipated to be $1.17.

Oil and Gas Investor reports that so far this summer, Viper Energy Partners LP’s A&D team has been very active through the Permian Basin, closing 50 deals since the first quarter.

Viper purchased mineral interests in the Permian and said in July 17 regulatory filings that more deals are pending after a three-month tear that totaled $276.6 million.

With the deals, Viper, stands to increase its net royalty acreage by 37%. After closing its additional deals, the 3-year-old company will own mineral interests on 8,905 net acres.

Recent deals with third-party sellers also helped diversify its holdings. After closing its remaining deals, Diamondback will operate about 38% of Viper’s net acreage compared with 41% at the end of March. When the company was founded in 2014, about half of its assets were operated by Diamondback.

About Viper Energy Partners LP

Viper is a limited partnership formed by Diamondback to own, acquire and exploit oil and natural gas properties in North America, with a focus on the Permian Basin.

About Diamondback Energy, Inc.

Diamondback is an independent oil and natural gas company headquartered in Midland, Texas focused on the acquisition, development, exploration and exploitation of unconventional, onshore oil and natural gas reserves in the Permian Basin in West Texas. Diamondback’s activities are primarily focused on the horizontal exploitation of multiple intervals within the Wolfcamp, Spraberry, Clearfork, Bone Spring and Cline formations.

Factoid: Oklahoma, whose natural gas, oil and liquids formations are spread far and wide, is one of the top five of U.S. producing states with some of the largest oilfields. One of the biggest fields is the Sho-Vel-Tum field in southern Oklahoma which was discovered in 1905. Comprised of the Tatums, Sholem, and Velma fields, Sho-Vel-Tum is the largest oil and gas complex in Oklahoma encompassing over 650 sq km (241 sq mi).

EIA Report

Wednesdays report showed that domestic crude supplies fell by 4.7 million barrels for the week ended July 14, reflective that Saudi was delivering less crude, holding true to their comittment may act as a force for higher prices. That topped the forecast for a decline of 3 million barrels by analysts surveyed by S&P Global Platts. The American Petroleum Institute had reported late Tuesday a rise of 1.6 million barrels. Gasoline stockpiles also fell by 4.4 million barrels, while distillate stockpiles declined by 2.1 million barrels last week, according to the EIA.

Data from the U.S. Energy Information Administration on Thursday showed that domestic supplies of natural gas rose by 28 billion cubic feet for the week ended July 14. Analysts surveyed by S&P Global Platts forecast a build of 31 billion cubic feet. Total stocks now stand at 2.973 trillion cubic feet, down 299 billion cubic feet from a year ago, but 141 billion cubic feet above the five-year average, the government said. August natural gas NGQ17 closed Thursday at $3.043 per million British thermal units.

Oil pulled back Thursday, a day after a third consecutive weekly declines in U.S. crude supplies lifted prices to a six-week high.

The September contract for West Texas Intermediate crude CLU7 fell 40 cents, to finish at $46.92 a barrel on the New York Mercantile Exchange. The price is down another 37 cents this morning as of 8:56 AM ET.

September Brent LCOU7 0.77% lost 40 cents, closing at $49.30 a barrel on ICE Futures Europe, after tapping a high of $50.19.

The supply glut remains as the most significant factor in oil pricing. Until the glut fades in a meaningful way, the odds remain stacked against any substantial upward move in price.

In therapy after strokes, T. Boone Pickens writes that he is in ‘the fourth quarter’ of life

In a column posted Thursday on the LinkedIn website, 89-year-old T. Boone Pickens acknowledged that he is attempting to recover from health setbacks during what he called “the fourth quarter” of his life.

“Just a year ago, I felt immortal, wearing my age with pride (and) even joking about it,” Pickens wrote. “Last year, I opened a speech with this: ‘The other day, I turned 88 and realized my life was half over.’ I refused to call my 2008 autobiography ‘Life in the Fourth Quarter’ because, well, hell, I wasn’t in the fourth quarter.

“But things have changed for me” since December, when he suffered several strokes. “I clearly am in the fourth quarter, and the clock is ticking and my health is in decline, much as it is with others in my stage of life.”

Since 2003, the oil-and-gas magnate and financier has attended nearly every Oklahoma State University home football game and most of the Cowboys’ road games. It’s not a certainty, however, that the 1951 OSU graduate will be able to attend games during the 2017 season.

In the LinkedIn column, Pickens discussed the challenges stemming from the strokes and from an unspecified injury sustained more recently.

A Holdenville native, Pickens is founder and chairman of Dallas-based BP Capital Management.

The first economically significant Texas oil discovery came in 1894 in Navarro County near Corsicana. The Corsicana oilfield developed gradually and peaked in 1900, when it produced more than 839,000 barrels of oil.

Encana Delivers Strong Results

Canadian oil and gas producer Encana Corp on Friday posted a quarterly profit that handily beat estimates and the company said it was expecting a strong 2018 even with current commodity prices.

Encana has benefited from downsizing its operations to focus on four core North American assets: the Montney and Duvernay in western Canada, and the Eagle Ford and Permian in the United States.

The company raised its forecast for production growth from core assets in 2017 to between 25 per cent and 30 per cent from the more than 20 per cent growth it had forecast in May.

Encana reported operating earnings of 18 cents per share, which largely beat analysts’ average estimate of 4 cents per share, according to Thomson Reuters I/B/E/S.

Closing Thought: Life consists not in holding good cards but in playing those you hold well. Which is backed up by the thought – Life is 10% what happens to you and 90% how you react to it.

Friday Snippets

US producers face higher drilling costs as more rigs come online

Oilfield service costs rose by 8% in June from a November 2016 low and were up nearly 3% from the same month in 2016, according to data from the Bureau of Labor Statistics. However, these increases have yet to offset the 34% decline in drilling costs during the downturn and can be considered modest given that the US rig count has more than doubled in the past 12 months….

Magnetar sets up office in Houston to expand energy footprint

Illinois-based alternative investment management firm Magnetar Capital, which manages about $13.7 billion, has opened an office in Houston as it seeks to expand its energy investment activities. “The opening of our new Houston office is a natural next step for our energy business given our extensive network across the upstream, midstream, downstream and energy services sectors,” said Magnetar Head of Energy Eric Scheyer…

Oil companies’ focus on natural gas may fall apart

Oil majors have been shifting their focus to natural gas, which they tout as the fuel of the future, but gas could be displaced by the rise of cheaper renewables. Gas’ share of global power generation is seen dropping from 23% in 2016 to 16% in 2040 as building new onshore wind and solar capacity will likely become cheaper than running existing coal and gas plants by the late 2020s, according to Bloomberg New Energy Finance.

Oil market under pressure as number of US uncompleted wells keeps rising

The number of drilled but uncompleted oil and natural gas wells across the seven major US shale plays has increased by 1,000 since December 2016, surpassing 6,000 by June, according to the Energy Information Administration. The Permian Basin alone has seen its backlog of such wells almost double from 1,200 a year ago to nearly 2,250 now — an imbalance that threatens to further weaken West Texas Intermediate prices unless producers step up completions or slow the pace of drilling of new wells.

Energy fund EnerVest loses $2 billion investment

Houston-based EnerVest’s $2 billion energy fund has gone bust, but the private equity firm says asset divestitures will allow it to cover much of its debt. EnerVest invested heavily in oil and natural gas producing assets during the first US oil boom, but the collapse of oil prices from $100 per barrel in 2014 to $46 per barrel now erased all of the fund’s value.

Fracking firm BJ Services planning $100M IPO

Hydraulic fracturing and pressure pumping provider BJ Services, which was separated from Baker Hughes in 2016, plans to launch an initial public offering of up to $100 million. BJ Services has 43 fracking crews and 241 cementers, with about half of each currently active.

EIA: US shale production to jump again in Aug.

The Energy Information Administration predicted that US shale output will rise by 113,000 barrels to 5.59 million barrels per day in August, marking the fifth straight monthly increase in shale production of at least 100,000 barrels. The Permian Basin will drive the increase with 64,000 barrels per day of additional supply, followed by the Eagle Ford Shale with 27,000 barrels.

Plains All American planning expansion of Sunrise pipeline

Plains All American announced plans to expand its Sunrise crude pipeline running from Texas’ Permian Basin to Cushing, Okla., by 180 miles and 120,000 barrels per day of capacity. The expansion is expected to become operational by mid-2019.
US shale-drilling rebound a boon to frac sand miners

The US sand-mining industry is expanding at an unprecedented pace as operators rush to meet the rising demand for sand now that shale drillers use up to 20 times more sand per well than they used to during the previous shale boom. Sand-mining operations have traditionally been concentrated in Wisconsin and Minnesota, but now those states are being challenged by Texas, where 10 frac sand mines have already been built and several more are in the pipeline.

BHP Billiton wants to increase US shale production

Australian mining and oil giant BHP Billiton plans to invest $1.2 billion in US shale next year to double the number of US shale rigs to 10 and boost shale production by 35%, CEO Andrew Mackenzie said. BHP’s shale announcement comes at a time when the company is facing increased pressure from activist investors to divest its US shale assets.

Exxon fined $2M for sanctions breach when Tillerson was CEO

The Treasury Department says it is slapping Exxon Mobil Corp. with a $2 million fine for violating Russia sanctions while Secretary of State Rex Tillerson was the oil company’s CEO. The U.S. says Exxon violated the sanctions in May 2014 when two subsidiaries signed deals with Igor Sechin. Sechin is the chairman of Russian oil giant Rosneft and is on a U.S. blacklist over Russia’s actions in Ukraine.

July 14, 2017

Silverback Exploration II, LLC, an independent oil and gas exploration company based in San Antonio, announced today that it has secured an initial equity commitment of $500 million from EnCap Investments L.P. Silverback II was formed by the same team that successfully led its predecessor company, Silverback Exploration, LLC, which was also backed by EnCap.

Silverback II was formed to pursue organic development projects and strategic acquisitions in conventional and unconventional resource plays across the U.S. and is led by the seasoned Silverback I management team — Chief Executive Officer Stephen Lipari, Chief Commercial Officer David Frye and Chief Exploration Officer Jon Conaway. George M. Young Jr. and Ted Collins Jr. serve as nonexecutive advisers.

Silverback I developed a significant position in the heart of the Delaware Basin, including approximately 35,000 net acres, production of 3,500 barrels per day of crude oil equivalent and approximately 600 horizontal drilling locations. In December 2016, its leasehold interests and related assets were sold to Centennial Resource Development Inc. and its affiliates (NASDAQ: CDEV) (NASDAQ: CDEVW) for $855 million.

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Factoid: Natural gas comes in two forms – dry or wet. Dry natural gas is what is commonly referred to by the media and is used in heating and cooling systems, and for electrical power generation. Dry natural gas is almost completely methane (the higher the methane concentration within the gas, the drier it is). In comparison wet natural gas contains less than 85% methane and has a higher percentage of liquid natural gasses such as ethane and butane.

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Are OPEC Cuts Making A Difference?

OPEC’s rate of compliance with the 1.2m bbl/day crude output cuts agreed in November 2016 decreased in June to 78%, compared 95% in May, as the cartel’s members Libya and Nigeria, which are exempt from the agreement, increased their output by more than 700,000 bbl/day during June.

Stronger rates of compliance were observed among the non-OPEC producers who also agreed to output cuts in 2016, led by Russia, which rose to 82% among these 11 countries in June, according to the International Energy Agency (IEA).

However, the main objective from the output cuts – to increase crude oil values – remains elusive, with investors slashing their positions in crude futures from the end of May to the end of June by more than 200m bbl to 312m bbl.

Crude prices are currently lower than when the OPEC cuts were officially announced in November.

This Friday morning, Brent crude futures, the international benchmark for oil prices, were up 52 cents, or 1.1 percent, at $48.94 per barrel at 8:23 a.m. (1223 GMT). U.S. West Texas Intermediate (WTI) crude futures rose 46 cents, or 1.2 percent, $46.64.

The day OPEC signed its agreement in November 2016, prices closed trading at $50.47/bbl for Brent and at $49.44/bbl for WTI.

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Oil and Gas Prices

Oil prices edged higher on Friday and were on track for solid weekly gains following positive demand signals, production issues in Nigeria and a reported decline in stocks. Both benchmarks are on pace for a roughly 5 percent gain on the week.

Crude oil prices have turned higher even as the IEA warned that global market rebalancing has become less certain. The agency cited increasing OPEC output despite a cartel-led production cut effort even as more swing supply – particularly from the US – comes online.

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US on course to become world’s largest exporter of natural gas: IEA

– The U.S. is challenging Qatar and Australia as leading exporter of natural gas.
– The industrial sector will replace power companies as the biggest natural gas customer.
– Three new LNG terminals are being built on Texas coastline.

The United States is challenging Australia and Qatar as the world’s largest exporter of natural gas, according to a new report by the International Energy Agency.

Global gas demand is expected to grow by 1.6 percent a year for the next five years, with consumption on track to hit almost 4,000 billion cubic meters by 2022. China is projected to account for almost 40 percent of growth.

“The U.S. shale revolution shows no sign of running out of steam and its effects are now amplified by a second revolution of rising LNG supplies,” IEA Executive Director Fatih Birol said in a statement Thursday.

“Also, the rising number of LNG consuming countries, from 15 in 2005 to 39 this year, shows that LNG attracts many new customers, especially in the emerging world,” Birol added.

The U.S. is already the world’s largest producer of natural gas. The IEA estimated that by 2022 the country’s production will be 890 bcm, more than a fifth of global gas output.

Remember when: 1911

Water-well drillers on the W.T. Waggoner Ranch in Wichita County in 1911 found oil instead, creating the Electra field.

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Goldman: Oil Prices To Fall Below $40 If Shale Doesn’t Slow

Oil prices could soon fall below $40 per barrel if there isn’t a sustained drawdown in U.S. crude inventories and rig counts or without bold action from OPEC. That prediction comes roughly two weeks after Goldman downgraded its three-month oil price forecast from $55 to $47.50.

That prediction comes from Goldman Sachs, which says that the oil market is searching for a new equilibrium. The investment bank says that it is still too early to tell whether or not the most recent inventory reductions in the U.S. are an anomaly or the start of something more durable. Moreover, the higher-than-expected inventory declines in June occurred at the same time that Libya and Nigeria were adding new sources of supply. That is why the enormous drawdown, particularly last week, prevented the oil bulls from coming out in full force. Rightly so.

The rig count also initially appeared to be slowing – and actually declined recently for the first time in months – but rebounded in the most recent data. The same was true for U.S. oil production data, which fell and then rebounded. All of this is short-term noise in the data, and it will take several more weeks to see how the shale industry responds to recent plunge in oil prices. Goldman says the “coming month will be key to testing whether producers are responding to the signal of $45/bbl WTI prices.”

Closing Thought: Risk is what’s left over when you think you’ve thought of everything else.

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US shale drillers seen missing EIA production forecasts this year

US shale producers will likely miss the Energy Information Administration’s output projections for 2017 amid a shortage of fracking crews and weak prices. CUDD Energy Services General Manager Clint Walker said that US demand for hydraulic fracturing equipment outpaces supply by 2 million to 6 million hydraulic horsepower.

Barron’s sees oil hitting $60 by year’s end

Oil prices could reach $60 per barrel by the end of 2017, driven by higher global oil demand, shrinking oil inventories and lower OPEC production, according to a report from Barron’s citing Citigroup senior energy analyst Eric Lee. Lee predicts that global oil demand will hit a record of 97.3 million barrels per day this year, while OPEC supply is expected to decline by about 700,000 barrels per day.Oversupply fears cast shadow over US frac sand market

US frac sand mining companies such as Hi-Crush Partners, Smart Sand and US Silica Holdings saw their shares plunge about 8% or more on Friday amid growing oversupply concerns. Jefferies oilfield services analyst Brad Handler predicted that frac sand demand will total about 100 million tons in 2018, but investors are increasingly worried that demand will fall short of that forecast because of low oil prices.

Berkshire Hathaway Unit To Pay $9B For Bankrupt EFH

Berkshire Hathaway Energy announced Friday it will acquire a reorganized Energy Future Holdings Corp. for $9 billion, which will bring its nondebtor subsidiary Oncor Electric Delivery Co. LLC into Warren Buffett’s portfolio and add to his company’s expanding Texas holdings and energy investments.

Halcon Sells Oil Assets For $1.4B To Bruin E&P Partners

Energy company Halcon Resources Corp. has entered into an agreement that will offload its Williston Basin assets in North Dakota to Bruin E&P Partners for $1.4 billion in cash, according to a Tuesday announcement that said the deal will help raise Halcon’s liquidity.

US drillers sealed $208B worth of shale deals since 2014

US oil and natural gas companies have spent $208 billion combined on more than 650 shale deals in the past three years since the oil price crash, according to Bloomberg data. That amount represents a 12% increase from the total value of the deals struck in the three years leading up to the downturn.

US drillers spend tens of thousands on “super-spec” rigs

US oil companies are spending up to $23,500 per day to contract “super-spec” rigs, which
drill wells faster than older rigs, as producers become more willing to pay 10% to 20% more than spot rates in the Permian Basin and the Eagle Ford Shale for more efficient drilling. Super-spec rigs can cut the time needed to drill a well to under 10 days.

US to ship crude oil to India for first time

Top Indian refiner Indian Oil has purchased a cargo of 1.6 million barrels of US Mars Blend crude for October delivery in a first-time move that demonstrates the growing popularity of US crude in the Asian market thanks to its lower prices. “Heavy grades of US crude have become more price competitive compared with those from the Middle East, thanks to OPEC’s oil-output cut, which provided the US an opportunity to boost its own oil production,” said Global Gas Analytics senior energy analyst Abhishek Kumar.

Oil, gas veterans establish new upstream company

The five oil industry veterans behind Silverback Exploration have joined forces again to launch Silverback Exploration II, a new exploration and production company focused on both conventional and unconventional US plays. Silverback II has already secured a $500 million private equity commitment from EnCap Investments, which also backed the original Silverback.

Halliburton goes on hiring spree amid fracking boom

Halliburton has added about 100 employees to its workforce each month this year as the Houston-based oilfield services firm struggles to keep up with increasing demand for hydraulic fracturing services in West Texas. Halliburton has boosted its payroll in the region by more than a third to 2,700, while its active fleet of fracking trucks and pumps has expanded by 30% in the past few months.

EIA reports steep fall in US crude inventories

US crude stockpiles plunged by 7.6 million barrels in the week ended Friday, whereas analysts had expected a 2.6 million-barrel drop, according to the Energy Information Administration. Gasoline supplies were down 1.6 million barrels, while distillate stocks rose by 3.1 million barrels.

IEA: US to become 2nd-biggest LNG exporter in the world by end of 2022

The International Energy Agency predicted that the US will become the world’s No. 2 exporter of liquefied natural gas by the end of 2022 with a capacity of 3.7 trillion cubic feet per year, second only to Australia. “By the end of our forecast period, the United States will be well on course to challenging Australia and Qatar for global leadership among LNG exporters,” the IEA said in its report.

Ring Energy steps up efforts in Permian Basin

Strong results from four wells in the San Andres play of the Permian Basin have prompted Ring Energy to expedite drilling activity with plans to drill eight to 10 more new wells in the area this year in addition to the 22 originally planned. “As much as we would like to see $50-$55 oil, the economics on these wells work very well with $40 oil,” Ring Director and CEO Kelly Hoffman said.

Small Permian drillers face low oil prices, rising service costs

With oil below $45 per barrel and oilfield-service costs rising, many small shale drillers in the Permian Basin are having to shelve new projects and reconsider growth plans laid out earlier this year. Larger oil producers such as Noble Energy can afford to expand even with low oil prices because they hedged their production, whereas small firms make drilling plans based on cash flow.

Depressed oil prices put Okla.’s economic growth at risk

Oklahoma’s economy is again facing pressure from low oil prices and could see a slowdown in the pace of recovery just as it was starting to improve after four quarters of economic contraction, State Treasurer Ken Miller said. “Leading indicators … point to continued growth, but the anticipated strength of the recovery may be moderating as oil prices have come down slightly,” Miller said.

July 7, 2017

A federal appeals court on Monday sent a $52 million natural gas royalty settlement case back to federal court in Oklahoma over the calculation of attorney fees.

In a 2-0 ruling, a panel of the 10th U.S. Circuit Court of Appeals in Denver said the district court didn’t properly calculate attorney fees in the class-action settlement according to Oklahoma law.

The case alleged underpayment of natural gas royalties by SM Energy Co., several funds affiliated with EnerVest Energy and FourPoints Energy LLC. It was settled in 2015 for $52 million, minus expenses and fees. The case was brought by Chieftain Royalty Co.

Former appellate judge Neil Gorsuch, now on the U.S. Supreme Court, participated in the oral argument but not in the decision. Court rules allow the remaining two panel judges to act as a quorum to resolve the appeal.

Factoid: An estimated 15 trillion watts of power are being used across our planet at any one time. That’s the equivalent of powering ten billion 100-watt light bulbs at the same time.

Oil prices rallied Thursday, extending earlier gains after data from the U.S. Energy Information Administration showed that domestic crude supplies dropped by 6.3 million barrels for the week ended June 30. That topped forecasts for a decline of 1.6 million barrels by analysts surveyed by S&P Global Platts, and also came in above the fall of 5.8 barrels reported by the American Petroleum Institute late Wednesday. Supply data were released a day late because of Tuesday’s Independence Day holiday.

Despite the across-the-board petroleum supply declines, U.S. crude production edged up by 88,000 barrels a day to 9.338 million barrels a day, EIA data showed.

Rising U.S. oil production in the wake of the Organization of the Petroleum Exporting Countries accord has been a major concern in the market and has kept a lid on prices in recent months.

The latest EIA report on natural-gas supplies will be released today, a day later than usual because of the Independence Day holiday. Analysts polled by S&P Global Platts forecast a climb of 63 billion cubic feet in natural-gas supplies for the week ended June 30.

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Closing Oil and Gas Prices, Thursday, July 6th

August West Texas Intermediate crude tacked on 39 cents to settle at $45.52 a barrel on the New York Mercantile Exchange, well below the session’s high of $46.53. On Wednesday, the contract settled $1.94, or 4.1%, lower, posting its first loss in nine sessions and its biggest dollar and percentage drop since June 7.

In London, September Brent oil rose 32 cents to $48.11 a barrel after posting a decline of 3.7% Wednesday.

On Thursday, August natural gas NGQ17 climbed 4.8 cents to $2.888 per million British thermal units.

– Fisher says general investors could buy into natural gas drillers rather than trying to time commodity price moves.

– Fisher is less bullish on oil drillers and thinks crude will remain stuck in a range between $40 and $50 a barrel for some time.

Renowned energy trader Mark Fisher on Thursday forecast that a string of unseasonably warm winters will break and send natural gas above $4 or $5 per million British thermal units.

Natural gas prices have remained locked in a range between about $2.75 and $3.25 per mmbtu, but Fisher believes in the next year or two, winter temperatures will return to normal levels and push up fuel costs.

“At some point nat gas is going to trade with a four-, five-handle on it and surprise a lot of people,” the MBF Clearing founder and CEO told CNBC’s “Fast Money: Halftime Report.”

“In energy, natural gas has the potential for the most upside,” he said.

Investors who bought into big-cap natural gas players will be rewarded for waiting, said Fisher. He declined to offer his stock picks, but did say he isn’t certain the heavily indebted shale pioneer Chesapeake Energy would survive.

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Remember when: 1967

The first attempt by GHK at drilling deep gas in the Anadarko Basin, began in 1967 and took two years to reach what at the time was a record depth, 24,473 feet.

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Halliburton Acquires Tulsa’s Summit ESP

Houston-based Halliburton Company has acquired Tulsa-based Summit ESP, a leading provider of electric submersible pump (ESP) technology and services, according to a company press release issued Wednesday. The financial terms were not disclosed.

“The acquisition of Summit expands Halliburton’s existing artificial lift capabilities and increases our overall leading position in North America oilfield services,” said Jeff Miller, president and CEO of Halliburton. “Summit’s unrivaled service quality, proven technology and U.S. market leadership make it a perfect fit for Halliburton. This accretive transaction accelerates our strategy to deliver leading returns to our shareholders and maximize asset value for our customers.”

Founded in 2011, Summit was created by a group of former Baker Hughes Inc. employees, including CEO John Kenner, who previously served as president of Baker Hughes subsidiary Centrilift, according to a report by The Oklahoman.

Summit engineers, manufactures and services a complete product offering of electric submersible and surface pumping systems. The company has more than 500 employees in nearly 30 locations across North America.

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Closing Thought: To a man with a hammer, everything looks like a nail.

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Now Friday Snippets

Anadarko plugs over 6,000 oil and gas flowlines

Following a home explosion in Firestone, Colo., that killed two people, Anadarko Petroleum has plugged more than 6,000 abandoned oil and gas flowlines. It has also tested more than 4,000 active oil and gas lines.

Analysis: US shale drilling growth unsustainable with oil below $50

Oil prices could fall below $40 per barrel if US shale producers don’t willingly scale back activity, putting an end to the drilling boom, writes John Kemp. As oilfield service costs continue to rise, companies need oil prices above $50 per barrel to turn a profit, Kemp writes.

New fields bump up Alaska’s North Slope oil production

New oil wells — mainly in ConocoPhillips’ Alpine and Kuparuk fields and ExxonMobil’s Point Thomson field — boosted production from Alaska’s North Slope over the past year, showing the region remains a viable oil source. Meanwhile, another new field, Armstrong Energy’s Nanushuk, is expected to provide an estimated 1.2 billion barrels of oil.

US strategic crude reserves fall to 12-year lows

US strategic crude inventories shrank by roughly 13 million barrels over the past 17 weeks to 682 million barrels, the lowest level in over 12 years, as the shale drilling boom gradually reduces the nation’s need for a strategic reserve. “Given the fact that we don’t net import that much anymore, we only really need 300 million barrels” of SPR crude, Macquarie Capital analyst Vikas Dwivedi said.

McKinsey: Oil in $60-$70 range would propel US shale production

US shale production could surge to 9 million barrels per day by 2025 if West Texas Intermediate prices stabilize between $60 and $70 per barrel, according to a report from McKinsey Energy Insights. Under this scenario, shale drilling and completion activity would increase at a 20% annual rate while production would grow by 12%.

DOI Looks To Speed Up Oil And Gas Permitting On Fed. Lands

U.S. Secretary of the Interior Ryan Zinke on Thursday signed a secretarial order aimed at speeding up the process for oil and gas permitting on federal lands, saying it was important for the country’s energy strategy to reduce the application backlog and to streamline the mineral development process.

The deal, which Carrizo announced June 28, is expected to close in mid-August. Carrizo will receive 23,656 gross — or 16,488 net — acres, boosting its Delaware Basin position to more than 42,500 net acres.

Carrizo now plans to focus on its deep inventory of future drilling locations in the Eagle Ford Shale and the Delaware Basin. Therefore, the company plans to begin selling non-core assets and is targeting proceeds of at least $300 million, which it will use to reduce its debt.

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Factoid: Crude oil is classified as light, medium, or heavy, according to its measured API gravity.

EIA reports smaller-than-expected drop in US crude supplies

The U.S. Energy Information Administration (EIA) released its weekly petroleum status report Wednesday morning. The EIA inventory release showed that crude stockpiles recorded an unexpected build. The report further revealed that refined product inventories – gasoline and distillate – both decreased from their previous week levels.

Analysis of the EIA Data

Crude Oil: The federal government’s EIA report revealed that crude inventories increased by 118,000 barrels for the week ending June 23, 2017, following a decline of 2.45 million barrels in the previous week.

The analysts surveyed by S&P Global Platts – the leading independent commodities and energy data provider – had expected crude stocks to go down some 2.6 million barrels. A pullback in refinery crude runs and uptick in imports led to the surprise stockpile build with the world’s biggest oil consumer even as domestic production edged lower.

Importantly, stocks at the Cushing terminal in Oklahoma – the key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange – was down 297,000 barrels from previous week’s level to 60.84 million barrels.

Crude oil prices firm, set for biggest weekly gain since mid-May

Crude oil futures are on track for their biggest weekly gain since mid-May, ending five weeks of losses with prices underpinned by a decline in U.S. output. Oil prices are still set for their worst first-half performance since 1998.

WTI futures have added 5.1 percent this week, while benchmark Brent has gained 4.8 percent, marking the biggest rise for both markets since the week ending May 19.

Oil prices received momentum from Wednesday’s U.S. data and the market rejected the lows that we saw.

There are two key drivers. One is U.S supply side response to low oil prices. We could see more gains if there is a further drop in oil output, and the other factor is a weaker U.S. dollar.

Data indicating a fall in U.S. production bolstered markets this week after crude prices hit a 10-month low last week in the face of a mounting supply glut. U.S. crude output fell 100,000 barrels per day (bpd) to 9.3 million bpd last week, the steepest weekly fall since July 2016.

Natural gas highs and lows in the last 15 months

Natural gas futures hit $3.99 per MMBtu on December 28, 2016—the highest level in more than two years. On the other hand, it hit a 17-year low of $1.68 per MMBtu on March 4, 2016.

Meanwhile, US natural gas futures contracts for August delivery fell 1.6% to $3.04 per MMBtu (million British thermal units) on June 29, 2017. Prices fell due to profit taking. However, prices have risen 8.5% since June 22, 2017.

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Remember when: 1998

The nationwide average price of a gallon of gasoline in the United States in December of that year was 95 cents. The closing price for a barrel of crude oil sold on the New York Mercantile Exchange on December 31 was $12.05.

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Stack Extension Activity

Two Oklahoma based companies have recently filed permits in Major County up in northwest Oklahoma.

Six drilling permits for the county were issued for Chesapeake Operating (5) and SandRidge Exploration and Production (1).

All five for Chesapeake are wells to be drilled are spotted in Section 21-20N-12W located about 4 miles south of the town of Fairview. The multi-wells at the single platform site will be targeting the Mississippi Solid zone.

The other Major county permit was for SandRidge Energy and the well site spot is in Section 28 -20N-15W and is located approximately 9 miles northeast of the city of Seiling. SandRidge plans to target the Meramec and Osage zones.

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Closing Thought: The happiest of people don’t necessarily have the best of everything; they just make the most of everything that comes along their way.

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Now For Friday Snippets

Fitch Says Eased Regs Won’t Spur Lasting Energy Boom

President Donald Trump’s promises to roll back federal environmental regulations are not expected to be a major driver of new oil and gas exploration and production but will more likely spark opposition among state and local regulators that could open companies up to long-term risk, Fitch Ratings has said.

Devon Energy Urges 5th Circ. To Undo Gas Royalty Suit

A Texas federal judge flouted U.S. Supreme Court precedent and misinterpreted Texas state law when he certified a class of natural gas royalty owners accusing Devon Energy Production LP of stiffing them on royalties, the company told the Fifth Circuit.

Continental’s Hamm says oil prices need to rise above $50 a barrel

With US crude prices dropping almost 18% this year, Continental Resources Chairman and CEO Harold Hamm said a price drop below $40 a barrel is not sustainable. US crude, which traded Wednesday at about $44 a barrel, needs to rise above $50 per barrel, Hamm said in a CNBC interview.

Texas High Court Says Contract Law Rules In Royalty Row

The Texas Supreme Court ruled unanimously against Samson Exploration LLC on Friday and said the company must pay royalties for a gas well’s production to two pooled units of royalty owners, deciding a lower court was right to assert that contract law governed the overlapping obligation.

Shale veteran aims to repeat past success with new venture

Mark Papa, who helped EOG Resources become the fourth-largest US shale driller, is on track to turn his latest venture, Centennial Resource Development, into another shale success story. Under Papa’s lead, Centennial has raised $500 million to expand its debt-free business, boosting its valuation by more than sixfold to $3.6 billion in less than two years.

BP increases focus on Gulf of Mexico deepwater

BP is investing tens of billions of dollars in deepwater projects in the US Gulf of Mexico, hoping to eventually reduce the costs of offshore oil production by 50% or more at a time when competitors shun offshore investments. BP says its $9 billion Mad Dog Phase 2 would turn a profit even with $40-a-barrel oil, in stark contrast with the $100-per-barrel minimum oil price BP needed for new Gulf projects in 2013.

Cheniere looking to build more LNG plants

Cheniere Energy unveiled plans to expand its Sabine Pass terminal in Louisiana with the acquisitions of additional acres and build more, potentially smaller liquefied natural gas plants even though the global market is awash in supply. “Our goal is to leverage the existing infrastructure to build whatever the next round requires,” Cheniere Director, President and CEO Jack Fusco said.

New app provides oil, gas well data

A new mobile app, the Risk Based Data Management System WellFinder, allows users to search oil and natural gas well permit numbers, well types, production data and regulatory and emergency contacts. The app, which the Ground Water Protection Council launched in May, includes data from nine states and is helping field inspectors, industry members and residents

Clayton Williams Investor Wants Tally After $2.7B Deal

Driehaus Appraisal Litigation Fund LP petitioned the Delaware Chancery Court on Monday for an appraisal of its shares of Clayton Williams Energy Inc. after news of a $2.7 billion acquisition by Noble Energy Inc., suggesting that it would not receive fair value without court intervention.

Break-even prices rise for Permian shale drillers

Depressed oil prices along with rising oilfield service costs have pushed break-even prices in the Permian Basin from $39 per barrel earlier this year to $43 per barrel, making most wells unprofitable, according to Wood Mackenzie. The break-even level for new Permian wells could climb to $45 per barrel by the end of 2017 as oilfield service costs are seen rising by 15% to 20% in the region.

South Korean company partners with GE to develop US shale gas

SK Group, a South Korean energy company, and General Electric agreed to develop US shale
gas fields in a deal that could narrow the trade gap between the two countries. The agreement, which will help bring US natural gas to South Korea, was announced the day before a summit meeting between South Korean President Moon Jae-in and President Donald Trump.

As oil prices dip, shale producers remain cautious

US shale oil producers plan to revisit capital spending if prices spend several months below $45 a barrel. US oil prices on Tuesday closed at $44.24 per barrel, lower than highs near $53 in April, causing angst among shale oil producers with aims of generating enough cash flow to pay for higher capital spending.

June 23, 2017

OK doubles oil and gas industry rig count in a year

The oil and gas industry rig count is now double what it was this time last year in Oklahoma. In April, there was an average of 125 active weekly rigs. A year ago, there were 62 active rigs.

Last Friday’s rig count shows four counties in Oklahoma with double digit rigs running. Blaine (25), Kingfisher (21), Grady (17) and Canadian (11). The Oklahoma rig count was at 127 last Friday.

Today’s Baker Hughes Rig Report comes out at 1PM ET.

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Factoid: The summer solstice was this week and temperatures out in the Southwest are near all time highs The highest air temperature ever recorded on Earth was in Death Valley on July 10, 1913 — 134 degrees.

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EIA reports smaller-than-expected drop in US crude supplies

The U.S. Energy Information Administration (EIA) released its weekly petroleum status report Wednesday morning. U.S. commercial crude inventories decreased by 2.5 million barrels last week, maintaining a total U.S. commercial crude inventory of 509.1 million barrels. The commercial crude inventory remained in the upper half of the average range for this time of year.

Closing Oil and Gas Prices, Thursday, June 22nd

Oil rose on Thursday, a day after sliding to 10-month lows, but market sentiment remained negative due to ongoing pressure from a persistent supply glut despite OPEC-led efforts to balance the market.

U.S. crude futures rose 21 cents, or 0.49 percent, to settle at $42.74 a barrel. On Wednesday, they fell as low as $42.05, their lowest intraday level since August 2016.

Since peaking in late February, crude has dropped around 20 percent, erasing gains made at the end of last year after OPEC and other countries agreed to cut crude output 1.8 million barrels per day (bpd) for the first six months of 2017.

Natural-gas

The U.S. Energy Information Administration (EIA) reported Thursday morning that U.S. natural gas stocks increased by 61 billion cubic feet for the week ending June 16. Analysts were expecting a storage injection of 58 billion cubic feet. The five-year average for the week is an injection of 82 billion cubic feet, and last year’s storage injection for the week totaled 63 billion cubic feet. Natural gas inventories rose by 78 billion cubic feet in the week ending June 9.

Remember when: BP celebrates 40th anniversary of Prudhoe Bay oilfield BP on Tuesday celebrated 40 years of production at Alaska’s Prudhoe Bay even though the oilfield was originally intended to have a 30-year life. Prudhoe Bay, which produced over 12.5 billion barrels of oil over the past four decades, accounts for 55% of total Alaska output and supports over 16,000 jobs.

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EIA Tracks Over 200 Percent Growth In Crude Oil Exports Since 2010

Between 2010 and 2016, American crude and petroleum product exports more than doubled from 2.4 million barrels per day to 5.2 million bpd, according to a new report from the Energy Information Administration (EIA).

Since a spending bill signed by President Barack Obama in December 2015 lifted the decades-long ban on American crude exports, oil tankers loaded in U.S. ports have reached Europe, Asia, and other North American countries. In February 2017, total exports reached 1.1 million bpd – the highest monthly level on record.

While Canada remains the largest destination for U.S. crude oil exports, its share of total U.S. crude oil exports has declined, dropping from 92% in 2015 (427,000 b/d) to 58% in 2016 (301,000 b/d). Other leading destinations for U.S. crude oil exports in 2016 included the Netherlands, Curacao, China, Italy, and the United Kingdom.

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Closing Thought: “It’s what you learn after you know it all that counts.” – John Wooden

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Now for Friday Snippets!

US export boom suggests domestic surplus is moving overseas

The declines in US oil inventories in recent weeks along with the surge in US crude exports this year seem to imply that the domestic oil glut is simply being moved elsewhere, according to a Platts analysis. US crude exports crossed 1 million barrels per day in April, displacing other barrels of crude and thwarting efforts to bring the market into balance.

Sanchez Energy divesting Eagle Ford properties

Sanchez Energy has agreed to sell roughly 21,000 net acres in the Eagle Ford Shale to Lonestar Resources for $50 million in cash and 1.5 million Lonestar shares. The assets in Texas’ Fayette and Lavaca counties have net proved reserves of 2.7 million barrels of oil equivalent and net production of about 1,750 barrels of oil equivalent per day.

Companies expect to profit from shale drilling in Permian

Major oil companies such as Chevron and ExxonMobil say they plan to turn a profit from shale drilling in the Permian Basin in West Texas. They say they’ve learned from smaller companies’ failed efforts and will introduce new drilling methods as they aim to increase production in the basin to 4 million barrels per day over the next 10 years.

EQT to take over Rice Energy in $6.7B deal

EQT has agreed to purchase Rice Energy for $6.7 billion in a move that would turn the Pittsburgh-based company into the biggest natural gas producer in the US, with a total output of 3.6 billion cubic feet of natural gas per day. “This transaction brings together two of the top Marcellus and Utica producers to form a natural gas operating position that will be unmatched in the industry,” said Steve Schlotterbeck, president and CEO of EQT.

Occidental Petroleum acquires Permian assets for $600M

Occidental Petroleum will pay $600 million to acquire four enhanced oil recovery projects in the Permian Basin from Hess, including a natural gas processing plant, oil wells and a carbon dioxide field, with 2016 production of 8,200 barrels of oil equivalent per day on average. This transaction is one of several deals made by Occidental in a bid to boost its Permian output.

US oil production boom to cool down amid low oil prices

Depressed oil prices and a shortage of labor and equipment could force US drillers to scale back production and cut rigs in less-profitable plays such as the Bakken Shale, whereas rig growth in the Permian Basin will likely flatline. However, analysts don’t expect a dramatic slowdown in production unless oil prices fall into the low-$30 range.

Backlog of drilled-but-uncompleted wells keeps oil prices in check

Federal data show that the number of drilled-but-uncompleted wells hit a three-year high of 5,946 at the end of May, many of which could be tapped in the second half of the year when service firms are expected to add new capacity and crews. This means that hundreds of thousands of extra barrels of oil could flow into an already oversupplied market each day starting in late 2017 and through 2018, jeopardizing the oil price recovery and market balance.

The exorbitant acreage prices in the Delaware Basin have caused the internal rates of return in the region to drop to 21.5%, compared with 22.8% in the Midland Basin, where prices per acre are 65% lower than in the Delaware. This is putting a squeeze on the margins of drillers, which are finding it increasingly difficult to turn a profit with oil prices around $45 per barrel and rising service costs.

Tropical Storm Cindy prompts shutdown of Gulf oil production

Tropical Storm Cindy has forced Gulf of Mexico energy companies to shut 17% of oil production while vessel offloadings at the Louisiana Offshore Oil Port marine terminal have been put on hold. Shipping activity in the Gulf is expected to be the most affected by the storm, whereas natural gas production operations will remain largely intact.

Noble Midstream acquires energy infrastructure assets in $270M deal

Noble Midstream Partners has agreed to boost its stakes in two midstream firms operating in the Delaware Basin and the Denver-Julesburg Basin in a $270 million deal with Noble Energy. Upon completion of the deal, Noble Midstream will be the sole owner of Colorado River DevCo and will also hold 40% of Blanco River DevCo, up from 25%.

June 16, 2017

Crude prices remain the major question mark for the near future

For all the talk of higher prices and rising activity, crude prices are not significantly higher than a year ago and they recently even slipped below year-ago levels.

The April average oil price was a little higher, but that didn’t last long. The June average is not higher, in fact it’s slightly lower than a year ago.

The April average of $47 is 25.3 percent higher than the $37.51 averaged last April, and the year-to-date average of $47.94 is 50.3 percent higher than the $31.90 averaged in the first four months of 2016. After rising to about $51.50 in late May, prices recently fell below $46 a barrel.

There is no sign that shale producers will restrain production. They have redeployed rigs and personnel quickly since prices began strengthening in 2016 and made shale profitable again. In the Permian, concerns have been growing regarding increasing land prices where values for acreage have increased 30 percent from two years ago.

Increasing production, volatile oil prices, combined with rising service costs and acreage prices are not factors for creating optimism in our industry. Clear skies are not on the horizon.

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Factoid: In 1973, Texas produced around 2.5 million barrels of oil per day and over 53 million barrels per day of waste water. Today, Texas is over 2.6 million barrels of oil per day and only 20 million barrels of waste water.

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EIA reports smaller-than-expected drop in US crude supplies

US crude stockpiles declined by 1.7 million barrels in the week ended last Friday, whereas analysts had expected a draw between 2 million and 3 million barrels, according to the Energy Information Administration. Gasoline inventories climbed by 2.1 million barrels, while distillate supplies rose by 300,000 barrels.

Crude prices have been trading lower in the wake of a report from the International Energy Agency which that warned the global oil glut will persist this year despite efforts to curb supply.

The American Petroleum Institute late Tuesday had reported that crude inventories rose 2.8 million barrels last week, while analysts at Citi Futures forecast a decline of between 2 million and 3 million barrels.

The EIA’s reported decline in crude supplies was “a welcomed sight after Tuesday’s API report, but today’s report on the whole was still quite bearish,” said Troy Vincent, oil analyst at ClipperData. “The small draw to crude stocks was more than offset by the growth in gasoline inventories alone.”

Gasoline stockpiles rose 2.1 million barrels, while distillate stockpiles edged up by 300,000 barrels last week, according to the EIA.

Oil prices tanked by nearly 4% to their lowest level since November on Wednesday, following U.S. Energy Information Administration data that showed the decrease in crude stockpiles last week was smaller than anticipated.

Oil settled with a modest loss Thursday, following sharp declines in the prior session, as data showing that the global market remains awash in surplus oil, rising U.S. crude production and weak domestic gasoline demand kept pressure on prices.

Natural-gas rally

Elsewhere in the energy market, natural-gas prices rallied after the EIA reported domestic supplies rose by a smaller-than-expected 78 billion cubic feet for the week ended June 9.
July natural gas NGN17, +0.16% rose 12.3 cents, or 4.2%, to $3.056 per million British thermal units—the highest settlement since May 31, after ending Wednesday at their lowest since mid March.

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Remember when: There were people living in tents with children. There were a lot of them that had these great big old cardboard boxes draped around trees, living under the trees. And any and everywhere in the world they could live, they lived. Some were just living in their cars, and a truck if they had a truck. And I tell you, that was bad. Just no place to stay whatsoever. ~Mary Rogers, Life in the Oil Fields

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Oklahoma Oil and Gas Tax Collections Up in May

With oil and gas production booming in Oklahoma’s STACK and SCOOP plays, gross production tax collections were up significantly in May as part of the General Revenue Fund Collections reported by Secretary of Finance Preston L. Doerflinger.

However, overall general revenue fund collections missed the official monthly estimate by 1.5 percent, leaving the state with just enough money to pay its bills as the state approaches the end of the 2017 fiscal year.

As for the tax collections on oil and gas production, they totaled $13.7 million, a figure that was $3.7 million or 3.5 percent above the estimate. The total was also $7.8 million or 131.4 percent above the previous year.

Natural gas collections were $11.4 million, a total that was 120 percent above May of 2016,. They were also $1.8 million or 19.2 percent more than the estimate and $.2 million above the prior year.

Oil tax collections totaled $2.8 million or $1.8 million or 357.8 percent over the estimate. The oil collections were also 208.9 percent or $1.6 million more than a year ago.

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Closing Thought: The bigger the problem you solve, the more money you make ~Jerry Weintraub

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Now for Friday Snippets!

Analyst: Oil price collapse sends a message to shale drillers

Oil’s recent 5% plunge and its failure to stabilize above $50 per barrel despite the US oil inventory draws in recent weeks indicates that the market wants US shale drillers to slow down, according to Tudor, Pickering, Holt & Co. analyst David Pursell. Pursell expects inventory levels to normalize by year’s end, “but that may only keep prices from falling,” he added.

OPEC’s 2014 price war was a boon to US shale drillers

The recent oil market downturn and collapse in oil prices have helped US shale producers lower breakeven costs in the Midland portion of the Permian Basin from $77 in 2014 to about $50 in January 2017, according to BTU Analytics. Meanwhile, initial 12-month oil estimated ultimate recovery in the Permian, the Bakken Shale and the Powder River Basin had climbed by 41% from 2014 to 2016, while five-year estimated ultimate recovery was up by 22% over the same period, partly thanks to a better understanding of geology and more efficient and greater proppant use, according to the Oxford Institute for Energy Studies.

Low oil prices weigh down US shale drillers as hedging rush wanes

US shale drillers slowed down hedging activity in the first quarter of the year amid soaring oilfield service costs and the prospect of higher oil prices, increasing their exposure to price swings. “I think companies are a little bit nervous that they are underhedged right now and they will try to take advantage of any hedging opportunity they get at about $50 per barrel,” said Westwood Holdings Group Portfolio Manager Bill Costello.

Permian Basin Drives Energy M&A In 1st Half Of 2017

Energy dealmaking in the first half of 2017 saw midstream oil and gas companies joining their upstream counterparts in opening their wallets wide for assets in the oil-rich Permian Basin of West Texas.

PE-Backed Caerus Pays $735M For Colo. Natural Gas Assets

Private equity-backed Caerus LLC has agreed to pay $735 million to buy natural gas assets in northwestern Colorado from a subsidiary of Canadian oil company Encana Corp., the companies said on Friday.

DOJ Clears $32B GE-Baker Hughes Oil And Gas Merger

General Electric Co. and Texas-based Baker Hughes Inc. said Monday that they’ve reached an agreement with the U.S. Department of Justice allowing them to proceed with a planned merger that’s set to create an oil field services company with $32 billion in combined revenue.

US LNG reshaping global markets, Hamm says

Continental Resources Chairman and CEO Harold Hamm touted the cleanliness of American liquefied natural gas and said that US LNG exports to Europe can help reduce Russia’s influence on the continent. Hamm said US natural gas will have a global impact and called on the Trump administration to accelerate the permitting process for the development and export of LNG.

EIA predicts shale oil production increase in July

Oil production in US shale basins is expected to grow by 127,000 barrels per day to almost 5.5 million barrels per day in July, according to the Energy Information Administration. The largest gains will come from the Permian Basin and the Eagle Ford Shale, where production could climb by 65,000 barrels per day and 43,000 barrels per day respectively next month.

Proved oil reserves drop

The oil industry’s proved oil reserves — oil that can be extracted at current crude prices — declined last year, the Energy Information Administration said this week. Based on reports from 68 public companies, proved reserves dropped by 8.2 billion barrels last year, the second straight year of decline.

Goodrich to expand Haynesville position after strong well results

Goodrich Petroleum has acquired an additional 600-acre lease in Louisiana’s Haynesville Shale after a shale gas well in the play yielded better-than-expected results. The Wurtsbaugh 25-24-1 well achieved a 24-hour peak rate of 31 million cubic feet per day.

June 9, 2017

New COO at Continental Resources Exits the Company

Just weeks after Continental Resources Inc. announced the naming of Tony C. Maranto as the company’s new chief operating officer, he has suddenly resigned. Maranto had replaced Jack Stark as COO when Stark was named President.

Word of the resignation came in a one-sentence SEC filing made by Continental Resources this week. The resignation by the 57-year old Maranto was effective June 5, just five weeks after he joined the company.

Word of his hiring came back in April but he didn’t officially join the company until May 1. He had previously been vice president and chief operating officer at EnerVest Operating Company since 2016. Before that, he was vice president and general manager at EOG Resources in Oklahoma City.

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Factoid: Many products are derived from crude oil, including synthetic fabrics, plastics, furniture, insulation, flooring, pharmaceuticals and more. Products including Vaseline petroleum jelly and Maybelline mascara were originally developed from the byproducts of the early Pennsylvania oil fields.

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Break Even By Basins

Can breakevens continue trending lower as service costs rise? The Oklahoma STACK & SCOOP basins remain on the low end of the scale, indicating sustained activity for Oklahoma with a crude oil price range of >$45+.

Even as suffering oilfield-services contractors demand higher fees and help raise those breakeven prices some, OPEC’s room to maneuver in using supply cuts to push prices higher has shrunk significantly.

Oklahoma crude oil prices as of 5 p.m. Thursday:

Oil prices fell for a second day in volatile trade on Thursday, after hitting one-month lows following an unexpected surge in U.S. inventories and the return of more Nigerian crude to the market.

U.S. crude futures ended Thursday’s session 8 cents lower at $45.64 a barrel. They earlier fell as low as $45.20, the weakest level since the contract crashed through a number of key technical levels to $43.76 on May 5.

Brent crude ended down 20 cents at $47.86 after striking a session low of $47.56.

Yesterday, the Former F.B.I. director James B. Comey delivered senate testimony about the U.S. President and an investigation into Russian interference with the U.S. election. The hearing was distracting U.S. players from the oil market, said Rob Haworth, senior investment strategist at U.S. Bank Wealth Management.

Today the prices are more quiet and a lot of people are focused on a lot of other things that probably wont drive these prices said Haworth.

Thursday’s trading volumes for WTI were down about 84 percent from the same time on Wednesday.

Halcon Resources Corp. received better than expected results from its first Permian Basin well. Completed with a lateral length of 5,167 feet while targeting the Wolfcamp A Interval, Halcon’s first Ward County, Texas well has significantly exceeded Halcon’s expectations.

Based on the results of the CRMWD 79 #1H well, Halcon has decided to exercise an option to acquire more acres in the area. For $11,000 per acre, Halcon will add 6,720 net acres in the Permian. The option to acquire the acres expires on June 15. The CRMWD 79 #1H produced 1,038 boe/d on its 20-day average.

Earlier in 2017, Halcon closed on 3,634 acres in Pecos County for $88 million. In order to fund its newly acquired acreage in Pecos and the new acreage it has chosen to add in Ward County, Halcon has decided to sell its non-operated acreage in the Williston Basin. The property includes 2,350 boepd made up of 91 percent oil spread across 15,600 acres that still have 1,000 gross undeveloped locations. The sale of the assets is expected to take place later this summer.

In January, Halcon exited the Eagle Ford shale play in a 500 million dollar deal for all of its assets.

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Closing Thought: “Men are disturbed not by things, but the view they take of them.” — Epictetus

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Now for Friday Snippets!

Enhanced oil recovery technique could revolutionize oil drilling

An enhanced oil recovery technique that involves capturing carbon dioxide and injecting it into oilfields could substantially extend the life span of oil wells, boost production and create more value for producers while protecting the environment. The wider adoption of the technique, which is currently being used only at conventional oilfields, depends on whether Congress passes a measure this summer that would raise the carbon tax credit from $10 per ton to $35 per metric ton and help protect more US oil wells from future downturns.

Jobs returning to US oil patch

The renewed US drilling boom is breathing life into the oil jobs market, which has added more than 15,000 rig workers across oilfields in Texas, North Dakota and Colorado since the rebound. “Every rig you’re bringing back, you’re probably putting 30 people back to work,” said Graves & Co. energy consultant John Graves.

Texas well positioned to reap benefits from US LNG export boom

The US is poised to become a “global energy superpower” thanks to the growing export market for US liquefied natural gas, while Texas could emerge as one of the biggest winners of the LNG boom, said Railroad Commission of Texas Chairman Christi Craddick. US natural gas production this year is seen rising 2.5% over 2016 to an average of 74.1 billion cubic feet per day, while next year’s gas output could grow by 4% over 2017.

NM, Calif. Seek Quick Win In Energy Royalties Fight

California and New Mexico asked a Golden State district court Friday for a quick win in their suit against the federal government for millions of dollars in postponed oil, gas and coal royalties, saying the delay in payment was against the law.

Landowners Fight Gas Cos. Royalty Suit Arbitration Request

A group of Marcellus Shale landowners asked a Pennsylvania federal court on Wednesday to deny requests by Chesapeake Energy Corp., Anadarko Energy and others to force individual arbitration in a series of lawsuits alleging that the companies engaged in a monopolistic scheme to improperly deduct royalty payments.

Texas oil, gas industry continues recovery

The Texas oil and natural gas industry expanded for the fifth consecutive month in April, according to the Texas Petro Index, which measures the health of the upstream industry in the state. Year-over-year, the rig count rose from 196 to 425 and drilling permits surged from 683 to 909; the value of Texas crude and natural gas produced jumped to $4.7 billion and $1.9 billion, respectively; and upstream jobs in the state climbed to more than 204,000.

Linn Energy dumps remaining Calif. assets

Linn Energy is selling off the rest of its California assets, which consist of 2,000 net acres in the Brea-Olinda field, to an undisclosed buyer for $100 million. Linn plans to use the proceeds from the sale to repurchase shares.

Tallgrass proposes new oil terminal in Colorado

Tallgrass Energy Partners announced plans to develop a new oil terminal with a takeaway capacity of 80,000 barrels per day in Platteville, Colo., with completion scheduled for the second quarter of 2018. “The proposed Platteville Extension and Tallgrass Grasslands Terminal, together with our existing Buckingham Terminal and Northeast Colorado Lateral, give Pony Express and Tallgrass Terminals an unrivaled footprint in the (Denver-Julesburg Basin) and provide meaningful benefits to producers,” said Tallgrass Pony Express Pipeline Vice President and General Manager Doug Johnson.

Powder River Basin sees signs of resurgence

Oil and natural gas companies such as Chesapeake, Kirkwood, EOG and Devon Energy are looking to Wyoming’s Powder River Basin, with plans to invest $600 million combined in new wells in the region this year. The basin is emerging as an alternative to the Permian Basin, as it has similar geology and plenty of growth potential but much lower land prices of about $17,000 per acre.

Texas PE Deals Rebound With Oil Price Upswing

Private equity deal-making within Texas’ energy industry is making a comeback after a downturn in such investments through much of 2015 and 2016, and stabilized oil prices, combined with the affordability of entering the Texas market, means the number of deals in 2017 should continue trending upward.

Petroquest Query Just ‘Hail Mary,’ Say Royalty Owners

A natural gas royalty owner asked an Oklahoma federal court on Tuesday not to approve Petroquest Energy LLC’s request to certify a question for review in a suit accusing the company of taking improper deductions from royalty owners, arguing the question had already been answered and was a Hail Mary.

Halcon to expand Permian position after strong well results

Halcon Resources announced that it will exercise an option to acquire 6,720 additional net acres in the Permian Basin for $11,000 per acre after its first well in the shale play showed solid results. The CRMWD 79 #1H well targeting the Wolfcamp A interval recorded a 20-day average production rate of 1,038 barrels of oil equivalent per day.

June 2, 2017

The Trump Effect

The U.S. withdrawal from the landmark 2015 global agreement to fight climate change drew condemnation from Washington’s allies – and sparked fears that U.S. oil production could expand even more rapidly.

“I think we will see a United States that is about to go crazy in terms of producing fossil fuels,” said Matt Stanley, a fuel broker at Freight Services International in Dubai, adding other producers could do the same. “Why wouldn’t they ramp up production when producers like the U.S. have an open invite to do as they please?”

U.S. crude production last week was up by nearly 500,000 barrels per day (bpd) from year-earlier levels, straining OPEC’s efforts to reduce global oversupply.

“This could lead to a drilling free-for-all in the U.S. and also see other signatories waver in their commitments,” said Jeffrey Halley, senior market analyst at futures brokerage OANDA.

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Factoid: “Peak oil” is a concept created by geoscientist M. King Hubbert in 1956 to predict when U.S. oil production would peak.

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Duncan Suffering From High Unemployment

The latest figures from the Oklahoma Employment Security Commission show Stephens County in southern Oklahoma, where Duncan is the county seat and home to big Halliburton operations continues to suffer.

It has the state’s third highest rate of unemployment at 6.5 percent, lagging only behind McIntosh County with 7.5 percent and Latimer County with 6.6 percent.

Those Halliburton layoffs that occurred in the past two years are still draining on the economy in Duncan. Halliburton’s former national headquarters were located there before the company decided to move to Houston, Texas.

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Closing Oil and Gas Prices, Thursday, June 1st.

Oklahoma crude oil prices as of 5 p.m. Thursday:

Oklahoma Sweet:
Sunoco Inc. — $44.75

Oklahoma Sour:
Sunoco Inc. — $32.75

Oil prices were mixed on Thursday, with Brent crude down on concerns that key producers were still adding to the global crude glut but U.S. crude up slightly after a larger-than-expected domestic inventory drawdown.

U.S. crude futures settled up 4 cents at $48.36 a barrel, while Brent ended down 13 cents at $50.63. After settlement, both benchmarks fell, failing to sustain the lift from the morning news of declining U.S. crude and gasoline stocks.
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Remember when: To help reduce consumption, the national maximum speed limit of 55 mph was imposed in 1974, and the US started to stockpile crude oil in the Strategic Petroleum Reserve in 1975.

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EIA reports 8th straight weekly inventory drop

The EIA said inventories, excluding those in the U.S. Strategic Petroleum Reserve, were reduced by 6.4 million barrels week over week.

According to KLR Group analysts, the draw widely beats out consensus estimates of a 3 million barrel draw.

EIA’s Wednesday report follows a Tuesday inventory release from the American Petroleum Institute, which showed an 8.7 million barrel draw in crude stockpiles.

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Closing Thought: There has never been any great accomplishment in history without faith. Faith is confidence in what we hope for and assurance about what we do not see.

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Now for Friday Snippets!

Certify Underlying Royalty Question, Okla. Gas Co. Says

Petroquest Energy LLC has asked an Oklahoma federal court to certify a question for review that it said would get to the heart of accusations it took improper deductions from natural gas royalty owners and would clarify a key precedent for similar cases.

Oil prices bolstered by higher fuel demand in US

West Texas Intermediate futures crossed the $50 per barrel mark early on Tuesday, boosted by increased demand for transport fuels as the US summer driving season kicks off. “The start of the US driving season … boosted confidence in the market that stockpiles would start to fall in coming weeks,” said ANZ bank, although oversupply concerns persist among traders.

Morgan Stanley warns of oil market oversupply in the long term

The extension of the OPEC’s output cut deal will only ease the oil supply glut in the medium term, according to Morgan Stanley analysts, who believe that strong shale growth will cause the market to oversupply again after the agreement ends in March 2018. “As a result, we lower our end-2018 WTI price forecast to $55 per barrel, from $60 per barrel before, although we could still see lower prices at some point during 2018,” the analysts said in a note.

Targa Resources to build NGLs pipeline in Permian Basin

Houston-based Targa Resources announced plans to build a $1.3 billion pipeline that would transport up to 550,000 barrels per day of natural gas liquids from the Permian Basin to its Mont Belvieu, Texas, plant. “We are excited to be moving forward with Grand Prix, which will enhance our ability to move our customers’ volumes from the wellhead in the Permian Basin and North Texas to key petrochemical and export markets,” said Joe Bob Perkins, CEO of Targa.

OPEC, US shale establish communications as they learn to coexist

OPEC and the US shale industry are set to hold more talks to find ways to coexist without conflict. Last week, US shale bankers attended OPEC’s Vienna meeting, where the cartel discussed shale’s potential and the threat it poses, and soon OPEC officials will travel to Texas to gain more insight into the shale industry.

BHP exploring several options for US shale business

BHP Billiton CEO Andrew Mackenzie held several meeting with investors last week to reassure them that the company was considering its best options to maximize the value of its US shale business. BHP reaffirmed its openness to divesting the shale assets amid pressure from activist investor Elliott Management, which accused the Australian miner of erasing $31 billion in value through its badly timed shale deals earlier this decade.

EIA: Permian well productivity to drop next month

Permian drilling productivity is expected to decline for the first time since 2013 in June, with oil production per new well seen down by 10 barrels to 630 barrels per day, according to the Energy Information Administration. This aspect, together with the fact that the number of drilled-but-uncompleted wells is expected to climb to 1,995 in June, suggests that explorers are adding rigs faster than the understaffed hydraulic fracturing firms can handle.

Texas crude production fell year-on-year in March

Texas produced 86.6 million barrels of shale oil and condensate in March, up nearly 2% from February but down from the same period a year ago, according to preliminary data from the Railroad Commission of Texas. “Texas preliminary March 2017 crude oil production averaged 2,492,349 barrels daily, compared to the 2,506,539 barrels daily average of March 2016,” the commission said.

US shale gas exports at record high

US shale natural gas exports hit a new record in May, with 18 liquefied natural gas cargoes departing Cheniere Energy’s Sabine Pass terminal in Louisiana during the month for destinations such as China, Europe and Latin America. The surging LNG exports could help the US become a net exporter by 2018 and possibly the third-largest operator of LNG export terminals after Australia and Qatar by 2020.

Chevron CEO optimistic about Permian Basin’s future prospects

Chevron Chairman and CEO John Watson is confident that drilling activity will continue to rise in the Permian Basin despite service cost inflation and believes shale will out-compete deepwater and conventional oil “for a long time to come.” To capitalize on the shale rebound, Chevron plans to invest billions of dollars in the Permian and boost its rig count from 12 to 15 by the end of the year and 20 by the end of 2018.

Breitburn’s Ch. 11 Exclusivity Extended Amid Deadline Talks

Breitburn Energy Partners LP has retained the sole right to file a Chapter 11 plan to reorganize for another month after a New York bankruptcy judge said Thursday he’d like to know why he shouldn’t fix an exclusivity deadline in the year-old case, as groups of impatient creditors have asked.

May 26, 2017

Oklahoma House passes extended lateral drilling bill in close vote

The Oklahoma House narrowly passed a bill Wednesday that would allow longer drilling in nonshale formations, with the vote held open for more than 30 minutes after an apparent deadlock.

Three members switched their votes on Senate Bill 867 in the last few minutes, giving the bill 51 votes and securing its passage. The final vote was 51-46, with two members claiming constitutional privilege. The bill now goes to Gov. Mary Fallin.

In its first year, SB 867 is expected to generate approximately $490 million in new royalty payments, raise more than $229 million in new state and local revenues and create nearly 6,000 new jobs in the oil and gas sector. Additionally, the measure is expected to spur nearly $6 billion in investment from oil and natural gas producers.

Factoid: Glycerin — a sweet-tasting synthetic ingredient used in toothpaste and other products — is a petrochemical derived from oil.

Linn Energy looks to divest California assets

Linn Energy Inc., Houston, has agreed to sell its properties in the San Joaquin basin of California to an unnamed buyer for $263 million.

The sale will consist of of 500 total net acres in South Belridge field in Kern County, producing from the Tulare and Diatomite formations using waterflood and thermal enhanced oil recovery methods at 800-2,000 ft. First-quarter shows that net production was 3,000 boe/d, with proved developed reserves of 11.7 million boe as of Mar. 1 at updated pricing of $3/MMbtu gas and $50/bbl oil.

The deal is effective Mar. 1 and is expected to close no later than July 31. Linn as of now is appears to be keeping its properties at Brea Olinda field of the Los Angeles basin.

Linn had budgeted $21 million for second-half development of the San Joaquin properties, but it instead will be used for development of growth projects or paying down debt. The firm in 2016 made no significant investments in its California assets.

The San Joaquin sale is the first executed agreement of Linn’s anticipated noncore divestiture program. After it emerged from bankruptcy earlier this year, the firm said it would market 3,000 net acres in California, 5,000 in Salt Creek, 20,000 in the Williston, 90,000 in the Permian, and 130,000 in South Texas.

Earlier this month, Linn agreed to sell 27,500 total net acres in Wyoming—80% of which is currently undeveloped—including 16,000 net acres in the Jonah and Pinedale Anticline fields to Denver-based Jonah Energy LLC for $581.5 million.

Net proceeds from the $844.5 million in sales agreements so far this year are expected to be used to reduce outstanding debt under Linn’s revolving credit facility and term loan. Pro-forma for the deals, the firm expects to have less than $50 million in total debt.

Closing Oil and Gas Prices, Thursday, May 25th

Oil prices plunged more nearly 5 percent on Thursday after OPEC and other major exporters extended their current deal to limit oil production for nine months, disappointing investors who were anticipating deeper cuts.

OPEC and other major producers, including Russia, will roll over their six-month deal to remove 1.8 million barrels a day from the market through March 2018. Investors had hoped the cartel might reduce output even further to drain a global glut that has depressed the market for almost three years.

Now For This Week’s Snippets:

Carlyle, EOG Resources Sign $400M Partnership

Private equity giant The Carlyle Group LP said Monday that it has inked a deal with oil and natural gas outfit EOG Resources Inc. that will provide up to $400 million for the development of energy assets in Oklahoma.

Southwestern Energy Settles Arkansas Royalty Row For $30M

Southwestern Energy Co. and some of its subsidiaries have settled a class action suit brought by oil and gas royalty owners in Arkansas for $30 million in addition to agreeing to change the way it calculates future payment deductions, according to a U.S. Securities and Exchange Commission filing.

XTO Energy, Royalty Owners Settle Underpayment Claims

An Arkansas federal judge on Tuesday agreed to dismiss suits from royalty owners that had alleged XTO Energy Inc. underpaid them for gas royalties after the owners agreed to drop their cases the same day.

Analysts revise up US shale production growth forecasts

Analysts are predicting larger-than-expected US shale production increases this year, with Macquarie Group lifting its forecast from 0.9 million to 1.4 million barrels per day through December, while JPMorgan Chase & Co. estimated growth of 800,000 barrels per day by the end of the year, double its previous projection. US shale output will continue to grow into 2018, with JPMorgan and Bank of America Merrill Lynch forecasting a 1.05 million-barrel-per-day increase and a 950,000 barrel-per-day surge, respectively.

Natural gas gaining ground in Eagle Ford

Energy companies are drilling more natural gas wells in the Eagle Ford Shale to export it south of the border as they seek to capitalize on Mexico’s soaring gas demand but declining production. As a result, shale gas production in Webb County, Texas, has climbed from about 100 million cubic feet of natural gas per day in 2010 to roughly 2 billion cubic feet per day now, while the number of gas rigs has gone up from three this time last year to eight in the present.

USGS lifts oil resource estimates for Permian’s Spraberry formation

A US Geological Survey assessment finished this month revealed that the Spraberry formation in the Permian Basin could hold 4.2 billion barrels of technically recoverable oil, up from 500 million barrels projected in 2007, and 3.1 trillion cubic feet of natural gas. The upward revision can be attributed to technological advances such as hydraulic fracturing and horizontal drilling that have helped companies unlock previously untapped resources.

Trump proposes US oil reserve sale

The Trump administration is seeking to sell half of the 688 million-barrel Strategic Petroleum Reserve over a 10-year period starting in October 2018, with proceeds estimated at $16.5 billion, according to the White House’s budget proposal. Independent oil analyst and economist Anas Alhajji warned that the move could thwart OPEC’s efforts to stabilize the oil market and raise oil prices through supply cuts.

Oil price recovery affecting oil industry players disproportionately

US shale producers are reaping a windfall from the recent upswing in oil prices while oilfield service companies still struggle, with just five out of the 10 largest oilfield servicers having turned a profit last quarter. Officials at service firms say this unequal situation could slow down production growth or limit the shale revival to just some shale fields.

Fracking has made Texas county the country’s richest

McMullen County, Texas, has become the richest in the US, with an average adjusted gross income of $303,717, thanks to hydraulic fracturing. County landowners make more money from oil and natural gas royalties than from their day jobs, while residents who don’t own land also benefit because fracking creates stable jobs and has helped the county improve its infrastructure and services.

Tide begins to turn for oilfield service companies

The positive effect of the US shale rebound on oilfield service firms’ bottom lines has so far been limited, but analysts have begun lifting their earnings estimates for oil service providers in the second half of the year as companies enjoy greater pricing power. One sign that the oilfield service industry is also poised for a rebound is the soaring demand for hydraulic fracturing sand, a crucial product for shale drillers.

Permian’s Midland basin has lowest shale breakevens in US

Shale drillers in the Permian Basin’s Midland area enjoy the lowest breakeven costs in the nation at $46 per barrel, followed by Oklahoma’s SCOOP/STACK with $47 per barrel and the Eagle Ford with $48 per barrel, according to the Federal Reserve Bank of Dallas. The Midland also emerged as the cheapest play when it comes to operating expenses, with $24 per barrel, while the SCOOP/STACK and the Eagle Ford came in second and third with $27 and $29 per barrel, respectively.

ConocoPhillips To Pay $39M To Leave NJ Water Pollution Suit

ConocoPhillips will pay $39 million to exit federal litigation in which dozens of companies have been accused of polluting New Jersey state waters with methyl tertiary butyl ether, or MTBE, a gasoline additive, according to a deal signed by a New York federal judge on Tuesday.

May 19, 2017

EOG Resources reports record Delaware wells

During its earnings call to discuss first quarter earnings, EOG Resources also reported record-setting wells in the Delaware Basin.In the first quarter, EOG increased its Delaware Basin premium net locations by 700 to 4,150 locations.

The company completed 33 wells in the Delaware Basin Wolfcamp with an average treated lateral length of 5,600 feet per well and average 30-day initial production rates per well of 2,855 barrels of oil equivalent per day or 1,850 barrels of oil, 450 barrels of natural gas liquids and 3.3 million cubic feet per day of natural gas.

Of special note is a four-well pattern in Lea County, New Mexico: The Whirling Wind 14 Fed Com 701H and the Whirling Wind 11 Fed Com 702H – 704H, which were completed with an average treated lateral length of 7,100 feet per well and average 30-day initial production rates per well of 5,060 Boed, or 3,510 Bopd, 700 Bpd of NGLs and 5.1 MMcfd of natural gas. Each well exceeded the prior all-time industry record for 30-day initial production from Permian Basin horizontal oil wells.

“EOG’s Whirling Wind wells shattered industry records in the Permian Basin,” said William R. “Bill” Thomas, chairman and chief executive officer. “Our advanced technology and proprietary techniques are leading to break-through well performance across our diverse portfolio of premium plays.”

In the Delaware Basin Bone Spring, EOG completed three wells with an average treated lateral length of 8,800 feet per well and average 30-day initial production rates per well of 3,255 Boed, or 2,525 Bopd, 335 Bpd of NGLs and 2.4 MMcfd of natural gas.

In the Delaware Basin Leonard, EOG completed three wells with an average treated lateral length of 3,800 feet per well and average 30-day initial production rates per well of 840 Boed, or 505 Bopd, 150 Bpd of NGLs and 1.1 MMcfd of natural gas.

These first quarter 2017 completions were drilled prior to 2016.

Energy Industry looks forward to expedited permits

Energy Industry groups have told President Donald Trump’s administration that they want two main things from his upcoming regulatory overhaul: a speedier permit process and simpler environmental regulations.

Groups representing the drilling, refining, mining, and building industries have submitted documents to the Commerce Department and Environmental Protection Agency in the last couple of weeks, outlining regulations they want to see eliminated or modified.

Many of those comments targeting the EPA, come in response to a pair of executive orders Trump signed during his first weeks in office, meant to cut the regulatory burden on companies. Trump has already moved to pull back and eliminate a slew of Obama-era environmental protections, including some aimed at combating global climate change.

This time around, it appears industry groups will put their focus on easing the permitting process for new facilities and installations.

The first order by President Trump, issued on Jan. 24, directed Commerce Secretary Wilbur Ross to review which U.S. regulations were burdens for domestic manufacturing. The Commerce Department requested feedback from the energy industry as a result of that order, with a March 31 deadline.

Ross was quoted in an interview last week saying “that the department was condensing the comments into a series of recommendations that could be presented to Trump as early as this month.”

The second order was issued Feb. 24, instructing all U.S. agency heads to launch a process to identify regulatory hurdles. Each agency has its own timetable for this process.

If the industry gets its way we could see a boost of approved permits and active rigs across the prominent plays in the U.S.

Factoid: Members of the Organization of the Petroleum Exporting Countries (OPEC) produce about 43% of the world’s crude oil, and possess almost 81% of the world’s total proven crude oil reserves, according to OPEC and U.S. Energy Information Administration data.

Closing Oil and Gas Prices, Thursday, May 18th

Remember when: So great was Cushing’s output that in 1919 its wells produced 17 percent of all oil marketed in the United States and between 1912 and 1919 produced 3 percent of all the world’s output.

WoodMac: Oil companies still cautious on industry outlook

Uncertainty continues to overshadow the oil market even though a majority of industry players surveyed by Wood Mackenzie see oil prices ranging from $50 per barrel to $60 per barrel this year, potentially hitting $80 per barrel by 2020. Despite the stronger oil prices, companies are cautious and risk-averse, and many will likely put investments on hold to focus on protecting dividends and improving balance sheets this year, Wood Mackenzie Head of Corporate Analysis Martin Kelly said.

US shale drillers take a break from hedging

US shale producers’ race to lock in higher prices for 2018 production is coming to a halt amid a decline in West Texas Intermediate 2018 swap prices, according to Societe Generale. SocGen commodity strategist Jesper Dannesboe said the reversal is a sign that US oil production growth will slow down since shale explorers usually hedge new production before boosting spending.

US LNG industry to get a boost from China deal

The US liquefied natural gas sector is moving into a new period of expansion thanks to a new trade deal with China, which opens the way to more exports of US shale gas to that country and may spur LNG investment in the US. Cheniere Energy spokesman Eben Burnham-Snyder said the company has been in talks with “several Chinese commercial entities” to secure long-term contracts.

Oil companies put greater emphasis on cybersecurity

Cybersecurity has become a priority for the US oil and natural gas industry in recent months, with an increasing number of companies boosting their cybersecurity budgets and pushing to improve their industrial control systems, according to Indegy CEO Barak Perelman. “In the last few months, we’ve seen more IT corporate security get demands for proof the facilities are protected,” Perelman said.

US shale production poised to increase again in June

US shale drillers are expected to boost production by 122,000 barrels per day to reach 5.4 million barrels per day in June, according to the Energy Information Administration. The Permian Basin and the Eagle Ford Shale will drive the growth, adding 71,000 barrels and 36,000 barrels respectively to daily shale production next month.

Anadarko to disconnect Colo. return lines

Anadarko Petroleum plans to permanently disconnect all 1-inch diameter return lines like the one linked to a home explosion in Firestone, Colo., from all of its vertical wells in the state. The company also said it would offer methane detection devices to Oak Meadows homeowners.

San Andres emerging as Permian Basin’s hottest play

The San Andres play has potential to become the Permian Basin’s most lucrative because drilling a well there costs between $1.8 million and $2.6 million, less than in the Delaware Basin, while the rates of return are 50% to 70%. “So when you look at the resulting economics, San Andres wells are robust at $45 per barrel of oil,” Yuma Energy Executive Vice President and Chief Operating Officer Paul McKinney said.

More oilfield servicers going public than upstream companies

Five US oilfield service companies have launched initial public offerings since January, compared with just two exploration and production companies, marking the first time in 10 years that oil-service IPOs have surpassed upstream listings, according to Bloomberg data. The shift comes as exploration and production companies increasingly are bought before making it to market.

EIA reports drop in US crude stockpiles

US crude supplies fell by 1.8 million barrels in the week ended Friday, the sixth week in a row of declines, according to the Energy Information Administration. Gasoline inventories dropped by 413,000 barrels, while distillate stockpiles plunged by 1.9 million barrels.

Shortage of fracking workers threatens US shale drillers’ growth

US independent shale producers spent $2.5 billion less than budgeted in the first quarter of 2017 as they struggled to find fracking workers, prompting delays and potentially undermining drillers’ growth ambitions, according to Infill Thinking. This shortage suggests that US oil production will likely continue to grow into early 2018, creating a big supply bubble that could hinder OPEC’s efforts to raise oil prices, said Joseph Triepke, Infill founder and principal research analyst.

Oil, gas companies keep flocking to the Permian Basin

Dealmaking activity in Texas and New Mexico has maintained momentum at the beginning of May as the Permian Basin continues to lure new entrants as well as explorers that exited the play during the downturn. Among this month’s major deals are CP Exploration’s sale of 2,200 acres in the Delaware Basin to Resolute Energy for $160 million and Peregrine Petroleum’s re-entry into the basin after its retreat in November 2016.

Closing Thought: You are the same today as you will be in 5 years, except for two things – the books you read and the people you associate with.

May 12, 2017

– U.S. West Texas Intermediate futures have climbed back above $47 a barrel after government data showed a big drop in the U.S. crude inventories.
– Gasoline demand also recovered from a recent weak spell, driving up U.S. gasoline futures.
– The drop was evidence to some that demand is robust in the U.S.

U.S. West Texas Intermediate futures have jumped back above $47 a barrel and international benchmark Brent topped $50 after the Energy Information Administration reported on Wednesday a much larger drop in the nation’s crude stockpiles and a strong rebound in gasoline demand.

U.S. commercial crude inventories fell by 5.2 million barrels, versus estimates for a 1.8 million barrel decline. This occurred as refinery activity eased from recent elevated levels and oil imports dropped by 644,000 barrels a day.

Gasoline demand rose by 252,000 barrels a day, bringing the four-week average closer to levels at this time last year after a string of data showing weekly consumption declines. While gasoline in storage did not decline as much as analysts anticipated, it did not rise as indicated in the earlier industry report.

But how much higher can crude oil prices climb?

Merrill Lynch cut forecasts for brent crude prices. It now expects the global benchmark to average $54 a barrel this year and $56 a barrel next year, down from the previous forecast of $61 a barrel and $65 a barrel respectively.

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WildHorse Resource Development Looking at a Transformation

WildHorse Resource Development Corp. has agreed to purchase an estimated 111,000 net acres in Texas along with associated production from Anadarko Petroleum Corp. and KKR.

The deal is expected to be valued at $625 million and has an anticipated closing around the end of June.

“This transformative acquisition presented us with a strategic opportunity to consolidate our acreage position,” WildHorse Chairman and CEO Jay Graham said in a May 11 press release.

Graham also added that “With a total of 385,000 net acres, this deal will make WildHorse the second largest operator in the Eagle Ford”

The acreage is in Burleson, Brazos, Lee, Milam, Robertson and Washington counties near College Station, Texas, and are near WildHorse’s existing positions. The net production for the acreage in the final quarter of 2016 was 7,583 barrels of oil equivalent per day, consisting of 72% oil from 386 operated wells.

“WRD’s pre-acquisition drilling schedule already includes 36 wells immediately adjacent to the acquired acreage,” Graham said in the release. “With the new acquisition, WRD can further optimize pad location and development planning with fewer limitations. As a result, this transaction immediately adds value to our existing program.”

WildHorse will pay for the deal with $556 million in cash to Anadarko and 6.3 million shares of WRD common stock valued at approximately $69 million to KKR. In addition, the Carlyle Group will purchase $435 million of Series A Perpetual Convertible Preferred Stock from WildHorse as a part of the financing for the deal. WildHorse will fund the remainder of the acquisition with borrowings under its revolving credit facility.

This deal is sure to set the scene for an exciting year in the Eagle Ford for WildHorse and their competitors.
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Samson announces asset sale
TULSA — Samson Resources II LLC said this week it plans to market its east Texas and north Louisiana assets after a strategic review.

Samson owns about 210,000 net acres in the east Texas and north Louisiana areas with an 86 percent working interest. It will offer the assets either as a whole or in four separate sub-packages: North Louisiana, Shelby Trough, East Texas Haynesville and Gregg-Rusk-Nacogdoches.

Samson II, which employs approximately 140 in Tulsa, acquired substantially all of the assets of Samson Resources Corp. when it emerged from Chapter 11 bankruptcy on March 1. Samson Resources had filed for Chapter 11 protection in September 2015 when it was $4.2 billion in debt.
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Factoid: The world’s 932 giant oil and gas fields are considered those with 500 million barrels of ultimately recoverable oil or gas equivalent. Geoscientists believe these giants account for 40 percent of the world’s petroleum reserves. They are clustered in 27 regions of the world, with the largest clusters in the Persian Gulf and Western Siberian Basin. The past three decades reflect declines in discoveries of giant fields.

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Closing Oil and Gas Prices, Thursday, May 11th

Oklahoma crude oil prices as of 5 p.m. Thursday:

Oklahoma Sweet:

Sunoco Inc. — $44.25

Oklahoma Sour:

Sunoco Inc. — $32.25

Remember when: In 1908, the first natural gas pipeline was constructed to transport gas from Caddo-Pine Island to Shreveport, Louisiana. This was one of the earliest commercial uses of natural gas, which was commonly viewed as an undesirable by-product of oil production and often “flared” or burnt off at the well site.

Now For This Week’s Snippets:

OU announces new $43 million engineering facility

A $1 million gift from Phillips 66 will support construction of a new academic building and research laboratory on the University of Oklahoma’s Engineering Quadrangle, President David Boren announced Thursday during a meeting of the OU Board of Regents. The $43 million Gallogly Hall, set to open in fall 2019, will house the College of Engineering’s Diversity and Inclusion Program offices, the Stephenson School of Biomedical Engineering, and new engineering labs and learning spaces.

Companies plan to step up oil drilling in Okla.

Oil companies are increasing their drilling activity in Oklahoma, saying that well results have been better than expected. Among the projects, Chesapeake Energy plans to drill test wells later this year in the Chester formation, and Devon Energy will drill 25 to 30 wells in the Meramec and Woodford formations.

Okla. Tribes Demand Sanctions Against Pipeline Co.

Tribal landowners asked an Oklahoma federal judge Thursday to impose sanctions on Enable Midstream Partners LP for defying court orders and failing to produce discovery documents as part of a suit challenging the company’s use of a natural gas pipeline on their property.

LNG exports are key to easing glut, lifting prices

Expanding liquefied natural gas export capacity and opening the way for US LNG to new markets could be the solution to years of low natural gas prices and also ease the domestic gas surplus, writes Shelley Goldberg. New US terminals and planned expansions could boost annual gas demand by 105 billion cubic meters by 2020, with the biggest demand growth likely coming from India, China, Taiwan and the Middle East, Goldberg writes.

Rate of oil bankruptcy filings slows down

Nine US oil and natural gas producers, including Memorial Production Partners and Vanguard Natural Resources, have filed for Chapter 11 bankruptcy protection in the first four months of 2017, down from 29 a year earlier, according to law firm Haynes and Boone. The number of bankruptcies in the oilfield service sector has also declined, from 22 at this time last year to 16 now.

Oil patch hiring makes tentative comeback, but there are risks

Employment across US oilfields has stabilized between 177,000 and 181,000 positions, according to the US Census Bureau’s latest quarterly data, partly thanks to a reduced number of layoffs. LinkedIn said that oil and natural gas hiring on its platform was 30% higher last month compared with a year ago, but risks to the energy jobs market remain, especially in the wake of last week’s drop in oil prices

Fracking is principal method used in US natural gas extraction

Hydraulic fracturing has become the main technique used to extract natural gas in the US over the past couple of decades. The combination of fracking and horizontal drilling has brought about a natural gas boom, with US gas production surging 40% since 2006.

Oil majors lag behind shale drillers in terms of productivity

US shale drillers are increasing production at an unprecedented pace, with Diamondback Energy, Concho Resources and RSP Permian posting output gains of 61%, 30% and 84%, respectively, in the first quarter. Meanwhile, Big Oil companies are having a hard time keeping up with shale, with all supermajors reporting production gains below 3.6%, while in the case of ExxonMobil and Petroleos Mexicanos, production fell 4% and 9.5%.

BHP Billiton Says Exco Owes It Millions In Royalties

BHP Billiton Petroleum LLC has filed a lawsuit in state district court in Houston alleging that Exco Operating Company LP owes it millions of dollars in royalties and other payments related to revenue from drilling operations in Louisiana that Exco originally said it was holding in suspense but now refuses to hand over.

US shale producers spending 10 times faster than rest of global oil industry

North American shale drillers have plans to spend $84 billion on exploration and production in 2017, an increase of 32%, whereas spending on international projects will rise just 3% this year, according to Barclays analysts. Independent US shale producers are expected to contribute $53 billion of that amount in 2017, up from $35 billion last year.

EIA revises up US crude production forecasts

The Energy Information Administration lifted its US crude production forecast to 9.96 million barrels per day in 2018, up from last month’s prediction of 9.9 million barrels per day. The agency also raised its production expectations for this year to 9.31 million barrels per day, up from 9.22 million barrels per day in April.

Well completion activity slows down in Texas

The number of drilling permits issued by the Texas Railroad Commission in April was up 30% over the year before, reaching 821 and serving as evidence of the oil industry rebound. However, well completions are down substantially, with 2,455 total well completions processed so far this year, down from 4,499 in the same period of 2016.

PROMINENT OILMEN

Another story we release every other week in Friday Snippets is a look back at prominent Oklahoma oilmen who have helped create, shape and transform the oil and gas industry in Oklahoma.

This weeks presentation is on Samuel Lloyd Noble. Born in Ardmore, he was an oilman, philanthropist, and founder of the Noble Corporation. For more information on Mr. Noble, listen to Mr. Noble’s daughter, Ann Noble Brown, who participated in an oral history interview presented by Voices of Oklahoma and The University of Tulsa, Oklahoma Center for the Humanities. Ann reflects on the memory of her father, Lloyd who died February 14, 1950 at the age of 53 years old. – See more at: http://bit.ly/2pMfEU7

We have a long list of historical characters we will be presenting but we welcome any suggestions of someone you would like to see featured.

Closing Thought: A wise man can learn more from a foolish question than a fool can learn from a wise answer. ~Bruce Lee

May 5, 2017

NOBLE DROPS THE MARCELLUS

Noble Energy has made a deal to sell off its assets in the Marcellus Basin for $1.2 billion.

They did not name the buyer in their statement this Tuesday, however the Houston company said $100 million of the $1.2 billion price tag will come from the three equal contingent payments that depend on regional natural gas prices rising above a certain level over the next few years. The other $1.1 billion is cash.

Noble is selling assets that produce 415 million cubic feet of natural gas equivalent a day across more than 385,000 acres in West Virginia and Pennsylvania. Roughly 88% of that production is gas as opposed to oil or other liquids.

The Marcellus Shale is still the largest shale gas pay in the nation, and it soaked up the majority of the oil industry’s early investments in shale gas. When natural gas prices plummeted half a decade ago, shale drillers started looking for less conventional oil in places like the Eagle Ford Shale in South Texas and another boom was born.

Noble’s deal is expected to close by the end of the second quarter. The company plans to pay off the debt it acquired when it bought Clayton Williams Energy and subsequently shifted their focus to the Delaware Basin in West Texas.

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MID-STREAM NEWS

Oklahoma City-based Enable Midstream Partners said its planned Project Wildcat will move up to 400 million cubic feet of natural gas per day to a processing plant and pipeline hub in North Texas.
In addition, Tulsa-based SemGroup Corp.’s Canton Pipeline will connect the company’s natural gas processing plant in N. Oklahoma to the STACK play.

The announcements on Wednesday come less than a month after Enable announced the Cana and STACK Expansion pipeline project, which is designed to transport natural gas from the STACK to existing gas markets.

Both projects are expected to continue the growth in both the SCOOP and STACK plays, which are contributing to a strong comeback for the Oklahoma oil and gas industry.

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Earnings Update-Chesapeake profit beats on higher crude prices

Chesapeake said average realized oil price rose 37 percent to $51.72 in the first quarter ended March 31, while natural gas prices rose about 32 percent. Chesapeake reported a net profit available to shareholders of $75 million, or 8 cents per share, in the quarter, compared with a loss of $1.11 billion, or $1.66 per share, a year earlier.

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Factoid: The largest oil field in the lower 48 states, the East Texas oil field, was not discovered until 1930, when wildcatter Columbus Marion Joiner (more commonly known as “Dad” Joiner) drilled the Daisy Bradford No. 3 well, in Rusk County, Texas.

Oil Prices dropped to a five-month lows on Thursday surrounding record trading volume in Brent Crude, as OPEC and other producers appeared to disregard any ideas further supply cuts to reduce the worlds oversupply of crude.

Closing prices, below $50 a barrel, were the lowest since the end of November 2016, and at the same time erased all of the market gains that followed the late 2016 announcement by OPEC to cut output.

Analysts say that non-OPEC members may have a hard time extending production cuts.

U.S. Crude ended the session almost 4.81% lower at $45.52 per barrel. Brent crude settled at $48.38, which is 4.75% lower.

“While the cartel is expected to extend a self-imposed production cap by another six months, it will be a challenge to convince several non-OPEC members to follow suit” said Abhishek Kumar, senior energy analyst at Interfax Energy’s Global Gas Analytics. “Persistent growth in US oil production will also make extensions of the OPEC cap beyond 2017 unlikely.”

Remember when: In 1960, five OPEC countries formed an alliance to regulate the supply and price of oil. These countries realized they had a non-renewable resource. OPEC held its first meeting on September 10-14 1960 in Baghdad, Iraq. The five founding members were Iran, Iraq, Kuwait, Saudi Arabia and Venezuela.

Now For This Week’s Snippets:

Big Oil firms on track for Q2 of profit gains

US oil majors ExxonMobil and Chevron are well-positioned for a second consecutive quarter of earnings growth following a strong first quarter that saw the two companies’ profits beat analyst expectations. If market conditions remain favorable, analysts expect ExxonMobil to boost its earnings per share by 132% this quarter while Chevron could report its best second quarter in three years.

US supply glut moves from crude to refined products

US crude inventories have dropped by an average of 326,000 barrels per day in the first three weeks of April with the help of refineries, which have been ramping up crude processing to 17.285 million barrels a day, the highest level in at least 35 years. But as crude inventories shrink, supplies of gasoline and distillates have surged in the past couple of weeks in a sign that the glut is not being cleared, but rather being shifted from crude to refined products.

Service companies rebound as oil drilling grows

Oilfield service companies such as Schlumberger, Halliburton and Baker Hughes are hiring more people, sending more equipment to fields and charging higher prices for products as US drilling increases. The trend reflects the recovery among oil and natural gas operators, which are showing confidence in oil prices and have more than doubled the number of oil rigs since May.

Explosion in Colo. town prompts 2nd oil company to close wells

Great Western Oil & Gas decided to shut down 61 wells last week as a precautionary measure following a fatal home explosion in Firestone, Colo. The move comes a few days after Anadarko Petroleum voluntarily shut down 3,000 vertical wells, as one of its wells is within 178 feet of the house that blew up.

Feb. oil production in Texas up from year ago

Crude oil production in Texas, the top oil producer in the US, reached 70.3 million barrels in February, up from 70.2 million barrels in February 2016, the Texas Railroad Commission said. Output from the Permian Basin in Texas has increased every month except for three since January 2016, according to the Energy Information Administration.

Permian Basin output expected to go up

Oil output in the Permian Basin may increase to 2.4 million barrels per day this month, the Energy Information Administration says. Closer well spacing, more efficient operations and the drilling of old vertical wells rather than new horizontal wells are contributing to higher output in the basin in western Texas and southeastern New Mexico, according to EIA staff.

Chevron: US shale not enough to meet global crude demand

US shale alone cannot satisfy the global oil demand, which is rising at a pace of more than 1 million barrels per day every year, said Chevron Chairman and CEO John Watson. In an interview with CNBC, Watson said shale can help, “but ultimately oil fields decline, and we’re going to need all sources of supply, including the shales, but also deepwater and other sources around the world.”

Centennial Resource Development expands Permian Basin position

Centennial Resource Development has agreed to acquire 11,860 undeveloped net acres in Lea County, N.M., from GMT Exploration, a $350 million cash deal that boosts its Delaware Basin holdings to 88,000 net acres. Centennial also said it was raising its 2020 oil production target to 60,000 barrels per day, up from 50,000 barrels per day.

EPA Dodges Trump’s Budget Ax, For Now

The U.S. Environmental Protection Agency’s slice of the $1 trillion budget that’s now making its way through Congress is only 1 percent smaller than its current funding level, a far cry from the 30 percent cut requested by President Donald Trump in March, and it’s not clear such drastic reductions will be achievable in the future.

Gas Cos. Want Arbitration For Pa. Shale Royalty Suits

A group of oil and gas companies including Chesapeake Energy Corp. and Anadarko Energy argued in a flurry of filings in Pennsylvania federal court Monday that a series of lawsuits in which hundreds of Marcellus Shale landowners alleged a monopolistic scheme to improperly deduct royalties belong in individual arbitration.

Hess Agrees To $3.75M Deal To End CO2 Royalties Row

Hess Corp. and a group of royalty owners on Monday told a New Mexico federal court that they had reached a $3.75 million deal to wrap up a class action accusing the company of undperpaying carbon dioxide royalties over an eight-year period.

Investigators link Colo. blast to abandoned gas line

Authorities investigating a fatal explosion in Firestone, Colo., have found that it was caused by a natural gas leak from an old underground pipeline that connected to an Anadarko Petroleum-operated well. The line was supposed to be out of service, but it was still filled with gas and leaked because of a cut about 10 feet from the house.

Anadarko Faces Shareholder Suit After Fatal Gas Explosion

A shareholder suit filed in Texas federal court on Wednesday alleges that Anadarko Petroleum Corp. lied about safety risks in its public filings prior to a fatal gas explosion that demolished a home in Colorado, arguing the company’s false disclosures cost investors money.

OPEC’s worst shale fears take the form of Diamondback Energy

Shale driller Diamondback Energy reported stronger-than-expected first-quarter results on Tuesday, with production up 61% year-on-year to 62,000 barrels of oil equivalent per day, even lower costs and cash margins up nearly $19 per barrel compared with a year earlier. Diamondback’s strong performance puts it on track to achieve double-digit growth at $50 oil, which demonstrates just how big of a nuisance US shale is and will continue to be to OPEC

PROMINENT OILMEN

Another story we release every other week in Friday Snippets is a look back at prominent Oklahoma oilmen who have helped create, shape and transform the oil and gas industry in Oklahoma.

This weeks presentation is on Samuel Lloyd Noble. Born in Ardmore, he was an oilman, philanthropist, and founder of the Noble Corporation. For more information on Mr. Noble, listen to Mr. Noble’s daughter, Ann Noble Brown, who participated in an oral history interview presented by Voices of Oklahoma and The University of Tulsa, Oklahoma Center for the Humanities. Ann reflects on the memory of her father, Lloyd who died February 14, 1950 at the age of 53 years old. – See more at: http://bit.ly/2pMfEU7

We have a long list of historical characters we will be presenting but we welcome any suggestions of someone you would like to see featured.

April 28, 2017

Supply & Demand

US crude oil stockpiles fell by 3.6 million barrels in the week ended Friday, a bigger decline than analysts had expected, according to the Energy Information Administration. However, gasoline and distillate supplies climbed by 3.4 million barrels and 2.7 million barrels respectively amid an increase in production at refineries.

Despite a larger-than-expected falloff in crude inventories, the bottom line is we have more crude than we did last year and are well ahead of what we had for the five-year averages—we’re not running out of crude oil anytime soon.

According to oil and gas consulting services firm Rystad Energy, US shale oil output is expected to grow by 100,000 bpd each month for the rest of this year and into 2018 if oil prices hold around $50-$55 a barrel.

“We see a risk for a weaker oil price toward the end of the year… because shale is delivering so much oil,” CEO Jarand Rystad said.

Some experts, however, claim the possibility of a production cut extension by oil producers could support prices to hover around current levels.

OPEC is scheduled to meet on May 25 to discuss whether to extend output cuts of 1.2 million bpd for another six months.

Tom Ward Starts Mach Resources

Natural gas icon Tom Ward may be shopping for shale gas assets that were sold in 2011 by Chesapeake Energy Corp., the company he co-founded in 1989.

Ward, who’s starting Mach Resources with a partner, said in a Bloomberg Television interview Wednesday that the Fayetteville shale in Arkansas and Oklahoma is a “wonderful place to look for gas.” BHP Billiton Ltd., which purchased the Fayetteville assets from Chesapeake in 2011 for $4.75 billion, said it’s weighing a sale a little more than two weeks after billionaire Paul Singer proposed spinning off the mining company’s U.S. petroleum division. (Read More)

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M&A Outlook

For the majority of global oil and gas companies, 2016 was a tough year. Buffeted by the headwinds of depressed crude oil and natural gas prices, corporate profits were squeezed, sparking widespread restructuring, layoffs and bankruptcies.

According to business advisory firm Deloitte, the first half of 2016 saw the lowest number of deals and deal value in 5 years. In the past 12 months, the market produced fewer funding options, in terms of both equity and debt, for buyers of oil and gas assets.

Fast forward to 2017, and it is very much a buyers’ market in the oil and gas industry, but with some limitations. Purchasers are faced with creating more innovative ways of structuring deals and are increasingly required to negotiate with a wider group of stakeholders. Further complicating the M&A picture is the emergence of private equity and other financial buyers who, unaccustomed to normal industry practice, bring a vastly different approach to risk and costs.

With more quality oil and gas assets set to come onto the market in 2017, the outlook for M&A is brightening, especially compared to 2016. When one considers that the industry’s underlying fundamentals are improving, and corporate credit profiles are on the mend, then the prospect of more transactions becomes a reality.

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Factoid: Crude oil is measured in barrels, which are each equivalent to 42 U.S. gallons. One barrel of oil accounts for about 19.15 gallons of gasoline, 9.21 gallons of diesel, 3.82 gallons of jet fuel, 1.75 gallons of heating oil and about 7.3 gallons for other petrochemical products like tar, asphalt, bitumen, etc.

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Closing Oil and Gas Prices, Thursday, April 27th

Oklahoma crude oil prices as of 5 p.m. Thursday:

Crude oil prices are down about 9 percent this year as rising U.S. production caps rallies fueled by short-selling and expectations that OPEC and other producer nations will extend a six-month deal to cut their output.

John Kilduff, founding partner at energy hedge fund Again Capital, believes oil prices could fall even further — to the November lows of $42 a barrel.

Remember when: Oklahoma City Field- The Mary Sudik No. 1, “Wild Mary Sudik”, gusher did not blow until March 25, 1930—she sprayed an estimated 3,000 barrels an hour for the next 11 days.

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Natural Gas News

The EIA announced a 74 Bcf injection for the week ended April 21. The full range of forecasts ahead of the release was between a 62 Bcf and a 91 Bcf injection, with an average of a 72 Bcf build. The report is bearish again this week as the injection came in higher than most expectations.

Now For This Week’s Snippets:

Surge Of Blank Check Cos. To Oil Patch Won’t Last

A recent influx of private equity-affiliated blank check companies looking to buy private energy companies has injected additional deal-making juice into an industry recovering from a prolonged oil price slump, but experts say that wave may recede quickly as traditional initial public offerings for energy firms pick up again.

Anadarko shuts down thousands of Colo. wells

Anadarko Petroleum announced it was shutting down more than 3,000 vertical wells in northeast Colorado until deemed safe after two people died in a home explosion in the town of Firestone. The cause of the explosion remains unknown.

Drilling methods complicate mineral lease process

Horizontal and extended wells in Oklahoma are causing confusion among mineral owners whose interests include more than one drilling section, mineral managers told the Oklahoma chapter of the National Association of Royalty Owners convention last week. Despite a complicated mineral leasing and payment process, mineral owners in the state are excited about the increase in drilling, the managers say.

US shale resurgence stronger than OPEC can handle

OPEC’s plan to balance the global oil market with production cuts has been derailed by a stronger-than-expected US shale revival, driven by rapid progress, technological advances and higher price expectations. Increased shale activity has caused US crude production to surge by 550,000 barrels per day since OPEC announced in November that it would cut supplies, with production seen rising by 860,000 barrels per day by the end of this year, according to the Energy Information Administration.

Business is booming for Schlumberger’s US fracking segment

Schlumberger plans to bring back into service its entire fleet of hydraulic fracturing equipment this year and ramp up hiring as it seeks to capitalize on the renewed shale boom. The company managed to swing back to profitability in the first quarter of the year thanks to its US fracking business.

Texas city positions itself as hub for exports

Corpus Christi, Texas, is emerging as an oil export hub and alternative to overcrowded Houston as surging oil production in the Permian Basin and Eagle Ford is prompting more investments in pipelines running to the city, according to a Morningstar report. Two new pipelines have been proposed from the Permian to Corpus Christi, potentially adding 1 million barrels of daily capacity by the end of 2019.

Goldberg: Marcellus Shale investments increased eightfold in 2016

Asset and corporate acquisition investments in the Marcellus Shale increased eightfold in 2016 over 2015 levels, analyst Shelley Goldberg writes. The region holds 500 trillion cubic feet of natural gas, 50 trillion of which is recoverable, and is considered the next largest natural gas field globally.

Adams Resources Exploration, the upstream subsidiary of Adams Resources & Energy, intends to file for Chapter 11 bankruptcy protection and conduct a sale process to shed its oil and natural gas exploration assets, which include stakes in about 470 wells spread across the Permian Basin, the Gulf Coast and the Haynesville Shale. Adams’ upstream operations took a back seat in recent years as the company increased its focus on its distribution and trucking businesses.

Halliburton Says Supplier’s IP Claims Vague, Seeks Sanctions

Halliburton Energy Services urged a Texas federal judge on Tuesday to dismiss trade secrets claims brought by machine supplier Legacy Separators LLC and to issue sanctions, arguing that after litigating for three years and racking up millions in attorneys’ fees, it still doesn’t know what secret it allegedly stole.

Analysis: Oil service costs to rise significantly this year

Oil field service costs could rise 15% on average this year and climb as high as 40% for certain equipment and services, potentially hurting drillers’ bottom line, according to a Wood Mackenzie report. The biggest increases will be recorded in West Texas oil fields, the report said, adding that companies with break-even costs below $40 per barrel would still be able to turn a profit.

BHP Billiton exploring sale of US shale gas assets

BHP Billiton is looking to divest its US natural gas assets in the Fayetteville Shale in Arkansas, last valued at $919 million, more than two years after it first attempted to sell them. News of a potential sale of the assets comes as activist investor Elliott Management is pressing BHP to spin off its US petroleum business.

After Rough Patch, Pa. Firms Bullish On Energy

Pennsylvania’s initial shale gas boom may be fully in the rear-view mirror, but after new well construction flatlined in 2015, energy lawyers in the state are seeing increased business and expressing renewed optimism — pointing to a surge in the title work that presages drilling and to increased downstream activities.

Bakken crude oil shipped to Asia for 1st time

The first-ever Asia-bound cargo of North Dakota Bakken crude oil departed the US in late March with Singapore as its destination, according to a shipping document. The shipment of more than 600,000 barrels of Bakken, Mars Sour and DSW crude, loaded by Mercuria Energy Trading, is expected to be the first of many to come thanks to the Dakota Access Pipeline, which will make it easier and cheaper to transport Bakken crude to the US Gulf Coast.

Rystad Energy: US shale a much bigger threat to OPEC than thought

US shale production could rise by 100,000 barrels per day every month this year and next if oil prices remain at current levels, potentially triggering a “volume war” between shale drillers and OPEC that could lower oil prices again, Rystad Energy CEO Jarand Rystad said. “A volume war is if they do not extend the production cuts and bring all the fields back into production,” Rystad added.

PROMINENT OILMEN

Another story we release every other week in Friday Snippets is a look back at prominent Oklahoma oilmen who have helped create, shape and transform the oil and gas industry in Oklahoma.

This weeks presentation is on H. H. Champlin a man who made fortunes in oil in Pennsylvania in the 1900s and in Oklahoma in the 1920s, and lost each in the volatility of the industry and the times. He became a politician who was a U.S. Congressman and Oklahoma governor.

We have a long list of historical characters we will be presenting but we welcome any suggestions of someone you would like to see featured.

Closing Thought: “Everything we hear is an opinion, not a fact. Everything we see is a perspective, not the truth.” – Marcus Aurelius

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April 21, 2017

OPEC cut doubts put oil on track for biggest weekly drop in a month

There’s a lot of talk the OPEC agreement is going to be extended, but we have a full month to go before the OPEC talks are held.

Both oil benchmarks fell this week as doubts emerged over the effect of the OPEC/non-OPEC production cut by almost 1.8 million barrels per day (bpd) during the first half of the year.

Saudi Arabia and Kuwait, key members of the Organization of the Petroleum Exporting Countries, favor extending their production-limiting deal with non-member producers into the second half of the year.

Russia’s Energy Minister Alexander Novak, however, declined to say whether the top oil producer would adhere to an extension before a joint meeting on May 25, saying global stocks were declining.

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Earnings

Schlumberger posts $279M profit after previous quarter loss

Increased hydraulic fracturing in the United States helped lift Schlumberger back into profitability in the first quarter after a loss in the previous three months.

But even as sequential quarterly earnings improved, the largest oil field service company reported a decline in net income to $279 million, or 20 cents a share, compared to $501 million, or 40 cents a share, in the same period a year ago. Revenues rose from $6.5 billion to $6.9 billion.

Analysts on average had estimated revenue of $6.96 billion.

Schlumberger said a ramp up in drilling activity in North America boosted pricing for its oilfield services, but the cost of reactivating equipment idled during the slump in crude oil prices gutted margins.

Rivals Halliburton Co and Baker Hughes Inc are set to report results early next week.

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Factoid: The largest environmental fine in U.S. history is $18.7 billion, which was given to BP for its oil spill in the Gulf of Mexico in 2010, the worst offshore oil spill ever in the U.S.

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Closing Oil and Gas Prices, Thursday, April 20th

Oklahoma crude oil prices as of 5 p.m. Thursday:

U.S. oil prices fell nearly 4 percent Wednesday, reaching a session low of $50.28 per barrel and marking their biggest daily percentage decline since early March, as inventories posted a less-than-expected decline for the week.

Remember when: On April 15, 1897, the Nellie Johnstone No.1 well became the first producing oil well in Oklahoma Territory. It produced more than 100,000 barrels of oil in its lifetime.

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Natural Gas News

U.S. natural gas futures edged lower on Thursday, holding on to losses after data showed that natural gas supplies in storage in the U.S. rose more than expected last week. Data from the U.S. Energy Information Administration Thursday showed that domestic supplies of natural gas rose by 54 billion cubic feet for the week ended April 14. Analysts polled by S&P Global Platts expected an increase of between 47 billion and 51 billion cubic feet. Total stocks now stand at 2.115 trillion cubic feet, down 368 billion cubic feet from a year ago, but 282 billion cubic feet above the five-year average, the government said.

Now For This Week’s Snippets:

IEA forecasts weaker global oil demand growth in 2017

Flat oil demand in the US and other countries such as Russia and India will have a greater impact on global oil demand growth than initially expected, with the International Energy Agency forecasting a demand increase of 1.3 million barrels of oil per day for 2017, down from a previous forecast of 1.4 million barrels per day. Meanwhile, the IEA expects production to climb by 485,000 barrels per day this year, compared with a drop of 790,000 barrels per day in 2016.

Investors step up funding for US shale drillers

Energy companies raised $19.8 billion in private equity funds in the first quarter of 2017, a nearly threefold increase from the same period of 2016, according to data provider Preqin. A large portion of that amount benefited shale producers, who are enjoying ever-declining costs, giving investors confidence that shale projects can offer returns with oil prices in the $40 to $55 per barrel range.

Williams Partners is selling its 88.46% interest in an olefins plant in Geismar, La., to Nova Chemicals for $2.1 billion in cash in a move that reflects the company’s desire to increase its focus on natural gas. Proceeds from the sale will be used to pay off debt and cover capital and investment costs.

ConocoPhillips sheds energy assets

ConocoPhillips Chairman and CEO Ryan Lance said output from shale drilling will help the company maintain production after selling $30.8 billion worth of oil and gas assets in the last six years. The company plans to sell almost 30% of its proved reserves to reduce debt and generate returns for stockholders.

Surge in US LNG exports a concern for manufacturers

Growing US liquefied natural gas exports threaten to shrink domestic supply and consequently raise prices for US consumers, the Industrial Energy Consumers of America wrote in a letter to Energy Secretary Rick Perry. In the letter, the manufacturing association also urged the Trump administration to reject new export permits and instead promote cheap natural gas as a means of creating jobs.

EIA: US shale production to post biggest increase in 2 years in May

US drillers are expected to boost shale production by 123,000 barrels per day to 5.19 million barrels per day in May, representing the biggest surge in output since February 2015 and the highest production level since November 2015, according to the Energy Information Administration. Natural gas production is also poised to increase by 0.5 billion cubic feet per day to a record 50.1 billion cubic feet per day in May.

PE-Backed Blank Check Co. TPG Pace Energy Files $600M IPO

TPG Pace Energy Holdings Corp. filed a $600 million initial public offering Monday, marking the latest of several private equity-affiliated blank check companies to seek money for an energy acquisition.

Even with high production, fewer wells completed in Permian Basin

February oil and natural gas production rose in the Permian Basin for the first time since 2014, indicating more drilling driven by higher prices, according to the most recent Texas Permian Basin Petroleum Index. However, there were fewer well completions, reflecting producers’ more careful shift toward monitoring each well’s activity before drilling.

Ring Energy expands Permian Basin footprint

Midland, Texas-based Ring Energy has acquired an additional 33,000 acres in the Permian Basin in a $16.6 million deal that brings its position in the play to 63,000 net acres. “Our drilling inventory is such that we can stay very busy for a number of years even if we choose to accelerate the program by adding additional rigs,” said Ring Energy Director and CEO Kelly Hoffman.

Economist hails recovery for Texas oil and gas

Karr Ingham, an economist with the Texas Alliance of Energy Producers, says the industry is steadily recovering from its worst recent downturn, as it recorded its fourth straight month of increased output on the Texas Petro Index. The rise is mainly attributed to the OPEC production cut, although the index is still around half the level of its November 2014 peak.

PROMINENT OILMEN

Another story we release every other week in Friday Snippets is a look back at prominent Oklahoma oilmen who have helped create, shape and transform the oil and gas industry in Oklahoma.

This weeks presentation is on H. H. Champlin a man who made fortunes in oil in Pennsylvania in the 1900s and in Oklahoma in the 1920s, and lost each in the volatility of the industry and the times. He became a politician who was a U.S. Congressman and Oklahoma governor.

We have a long list of historical characters we will be presenting but we welcome any suggestions of someone you would like to see featured.

STORIES & LEGENDS SERIES ABOUT OKLAHOMA OILMEN: H. H. Champlin

April 14, 2017

OKC Based Tapstone Files For $100 Million IPO

The Oklahoma City-based E&P Tapstone Energy Inc., filed for an IPO of up to $100 million as disclosed in regulatory filings on April 13. Tapstone claims to hold the largest contiguous leasehold position in the Northwest Stack Play,

The company’s acreage position in the Northwest Stack Play consists of about 200,000 net acres and is situated in Dewey, Woodward, Ellis and Major counties in Oklahoma, SEC filings said. Tapstone also holds an additional 220,000 net acres throughout the Anadarko Basin in Oklahoma, Texas and Kansas.

The company applied to the New York Stock Exchange to be listed under the symbol “TE.” Bank of America Merrill Lynch and Citigroup are underwriters to the IPO, according to Tapstone’s filings with the Securities and Exchange Commission (SEC).

Formed back in 2013 by its former CEO Tom Ward, Tapstone was funded by GSO Capital Partners LP, a subsidiary of The Blackstone Group LP.

“We began assembling our acreage position through a grassroots leasing program that we commenced in September 2014. As a result of our early identification of the resource potential of the Northwest Stack, as well as the general weakness in the oil and gas industry at the time, we were able to assemble a large, contiguous block of acreage in the Northwest Stack, which we do not believe would be possible to replicate in today’s market,” the company said in SEC filings.

Steven C. Dixon is the current chairman, president and CEO of Tapstone. Dixon has more than 36 years of experience in the oil and gas industry, according to filings, and was previously with Chesapeake Energy Corp. (NYSE: CHK). Dixon replaced Ward as Tapstone’s CEO in January after Ward left to focus on a new venture to be based in Oklahoma City.

Austin Atty Pleads Guilty To $30M Oil, Gas Securities Fraud

A Texas attorney and his business partner pled guilty Tuesday to two counts each of wire fraud and securities fraud stemming from charges they defrauded investors by convincing them to invest $30 million in fake entities they claimed were purchasers of oil and gas royalties

Robert Allen Helms and Janniece S. Kaelin, both of Austin, each pleaded guilty Tuesday to securities fraud and conspiracy to commit securities fraud and mail fraud.

Helms and Kaelin face up to 10-year federal prison terms and making restitution over what investigators have called a Ponzi scheme. Authorities say clients were defrauded between 2010 and 2013, with funds meant for energy-related investments instead used for personal expenses of Helms and Kaelin.

Factoid: The natural gas distribution pipelines in the US alone could stretch from Earth to the Moon 7-8 times.

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Closing Oil and Gas Prices, Thursday, April 13th

Oil prices were little changed on modest volume on Thursday, in a week where crude benchmarks recouped more of March’s losses on increased hopes world supply and demand were nearing balance.

The oil market is “slowly but surely” reaching a balance as a result of the success of the OPEC production deal, the head of the oil industry and markets division at the International Energy Agency (IEA), told CNBC on Thursday.

Remember when: In 1901 one of the largest and most significant oil strikes in history occurred near Beaumont, Texas, on a mound called Spindletop.

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Natural Gas News

U.S. energy firms are scrambling to finish a slew of pipelines that will unleash rich reserves of shale gas in Pennsylvania, West Virginia and Ohio as the nation prepares to become one of the world’s top natural gas exporters.

The pipelines are expected to boost output from shale fields in the three states by giving producers access to new domestic and international markets.

Those states could supply about a third of all U.S. natural gas once the pipeline expansion is complete, up from about 25 percent now, according to projections from the U.S. Energy Information Administration (EIA).

Now For This Week’s Snippets:

Antero Resources Ducks W.Va. Landowner’s Drilling Suit

A West Virginia federal judge on Friday tossed a landowner’s suit accusing Antero Resources Corp. of unauthorized drilling on her land, saying she can’t escape agreements allowing the energy company to drill a trio of wells and lease her mineral estate.

Okla. Fracking Earthquake Suit Heads Back To State Court

A federal judge on Wednesday remanded to state court a suit claiming the fracking operations of two oil companies caused destructive earthquakes in an Oklahoma county, ruling Oklahoma district court doesn’t have jurisdiction over the case since proposed class members don’t include those who reside on tribal or federal lands.

Mont. bill would force companies to reveal fracking chemicals

The Montana Legislature is considering a bill that would change the state’s current fracking disclosure rules, requiring energy companies to divulge the chemicals they use in the hydraulic fracturing process. The bill would require companies to submit chemical information to the state’s Oil and Gas Conservation Board, which would decide whether the information is confidential and would need a court order to be released.

Bonanza Creek Energy ready to emerge from bankruptcy protection

Bonanza Creek Energy said it plans to exit bankruptcy protection by the end of April after the US Bankruptcy Court in Delaware approved its reorganization plan. As part of the restructuring, Bonanza will convert $867 million in unsecured debt, get rid of $50 million in annual interest and hold a rights offering to raise $200 million.

Okla. oil, gas companies drilling longer wells

Oil and natural gas companies are deploying longer horizontal wells to Oklahoma’s SCOOP and STACK shale plays thanks to a combination of geological factors and improved well economics and processes. As a result, prices for acreage in the area are ticking up as promising results prompt companies to focus their capital and efforts on big wells.

Texas drilling permit applications surged in March

The Texas Railroad Commission issued 1,310 oil and natural gas drilling permits in March, up from 511 a year earlier, mostly in the Permian Basin. However, well completions declined year over year, down 60% to 77 for natural gas wells and 44% to 533 for oil wells.

EOG Resources’ newly completed Permian well could be next hot shale spot

EOG Resources has recently completed a new well in Loving County, Texas, in the Permian Basin’s Delaware Basin lobe with strong results, which suggests the area may present massive opportunities for EOG, Concho Resources, Energen, Matador Resources and WPX Energy, according to SunTrust Robinson Humphries analysts. Based on the results for other recently drilled wells in the Delaware Basin, the four companies’ drilling locations in the area could spearhead their production growth and help them beat their own expectations for the year.

A coalition of oil and natural gas industry trade groups including the American Petroleum Institute has voiced concern over President Donald Trump’s directive requiring energy companies to use US-made steel and pipe in their infrastructure projects. Industry players and their representatives argue that the uncertainty the policy has created could lead to infrastructure project delays and cancellations and reduced investments.

The American Petroleum Institute’s 2015 Joint Association Survey on Drilling Costs revealed that overall spending on drilling fell 27.2% to $122.8 billion in 2015 while the number of drilled oil and natural gas wells plunged by 37.6% over 2014 to 28,809. Shale provided a bright spot for the industry, accounting for 47.7% of all drilling spending for the year, while the number of shale wells remained at about the same level compared with 2014.

EIA: Shale to push US oil production near record levels

US oil production could average 10.1 million barrels per day by the end of 2018, up from the current 8.96 million barrels per day, bringing output levels within 30,000 barrels of a record high recorded in November 1970, according to the Energy Information Administration. The agency lowered its projections for US oil prices, expecting them to average $52.24 per barrel in 2017 and $55.10 per barrel in 2018.

Price gap between Midland crude, US benchmark keeps widening

The discount for Midland crude compared with the US benchmark reached its widest level since April 2015 last week, trading at a discount of $1.65 per barrel, down from a premium of $1.05 per barrel four months ago. “Aggressive Permian production growth alongside regional refinery outages and weaker export demand for shale crude has forced heavy discounts for Midland crude,” said Energy Aspects analyst Dominic Haywood.

Vine Resources to go public

Plano, Texas-based Vine Resources seeks to raise up to $500 million in an initial public offering on the New York Stock Exchange, according to a Securities and Exchange Commission filing. Vine is a natural gas exploration and production company focused on the Haynesville Basin.

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Closing Thought: “The path in front of you is rarely a straight line.” ~Ellen Bennett

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PROMINENT OILMEN

Another story we release every other week in Friday Snippets is a look back at prominent Oklahoma oilmen who have helped create, shape and transform the oil and gas industry in Oklahoma.

This weeks presentation is on E. W. Marland, a man who made fortunes in oil in Pennsylvania in the 1900s and in Oklahoma in the 1920s, and lost each in the volatility of the industry and the times. He became a politician who was a U.S. Congressman and Oklahoma governor.

We have a long list of historical characters we will be presenting but we welcome any suggestions of someone you would like to see featured.

STORIES & LEGENDS SERIES ABOUT OKLAHOMA OILMEN: E. W. Marland

April 7, 2017

Last nights attack on Syria and the President’s developing role in geopolitics and the after effects of those dynamics on oil prices are factors on which to keep a close eye. The U.S. airstrike consisted of 59 Tomahawk missiles. The missiles targeted the Shayrat air base near Homs, and were in response to a Tuesday chemical weapons attack.

The attacks last night had no dramatic effect on oil prices as the Friday markets reflect only sight increases in the front month contracts for both Brent crude and WTI.

Further volatility in the oil markets may come from what occurs between the U.S. and Russia. The U.S. missile strike could make it all but impossible to improve relations. The attack last night comes ahead of U.S. Secretary of State Rex Tillerson’s trip to Moscow next week.

EIA reports surprising jump in US crude inventories
US crude stockpiles expanded by 1.6 million barrels in the week ended Friday, missing expectations for a decrease of 435,000 barrels, according to the Energy Information Administration. Gasoline inventories dropped by 618,000 barrels, less than expected, while distillate supplies were down 536,000 barrels, also missing forecasts.

The rise in inventories indicates that the supply glut position in the market is increasing, which adds more uncertainty to the movement of crude oil prices.
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Factoid: The US has 4% of the world’s population but consumes 25% of the world’s crude oil.

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Closing Oil and Gas Prices, Thursday, April 6th

Oil prices rose more than 1 percent on Thursday, on track for a fourth straight day of gains, but analysts remained cautious about record-high U.S. crude inventories.

Brent crude futures climbed to $54.89 a barrel. U.S. West Texas Intermediate (WTI) crude futures rose 55 cents a barrel to $51.70. WTI touched a session high of $51.82 a barrel on Thursday.
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Remember when: 1973-1974 – Due to US support of Israel in the Arab-Israeli conflict, the members of OPEC decide to raise the cost of oil from $3/barrel to around $12/barrel.

Although natural gas has not returned to its 52-week low of $2.64, which it reached in April 2016, the energy commodity has seen greater volatility in recent weeks due to unseasonably warm weather crimping the commodity’s bull run at the start of 2017. From the middle of February to today, natural gas reversed course and remains 8.8 percent up from the start of the year.

Now For This Week’s Snippets:

$5M Continental Oil Settlement Wins Initial Approval

A $5.1 million deal to settle a class action alleging oil producer Continental Resource Inc. failed to pay interest on some well royalties received preliminary approval from an Oklahoma federal judge Thursday.

Oklahoma Judge Tosses Enviros’ Fracking Earthquake Suit

An Oklahoma federal judge on Tuesday dismissed environmentalists’ lawsuit against a Chesapeake Energy Corp. unit and two other oil companies alleging that their fracking disposal wells are causing Oklahoma’s increase in earthquakes, saying that the court doesn’t know enough about earthquake science to rule on the case.

Enable Midstream, Newfield Exploration sign gas transportation deal

Enable Midstream Partners has signed an agreement with Newfield Exploration to transport up to 205 million cubic feet of natural gas per day from Oklahoma’s STACK shale play to gas markets in a move that could boost drilling in the region. “There’s a lot of development that can take place in the SCOOP and STACK, but that’s only going to happen if we can solve this issue of being sure we can get the associated natural gas produced with the oil to market outside the Anadarko Basin,” Enable Midstream President and CEO Rod Sailor said.

Increase in drilling prices signals balancing oil market

The producer price index for well-drilling climbed by 8.7% in February from January, the biggest increase since 2005, in a sign that the oil markets are finding a balance. “Oil prices look to have entered Phase 2 of the commodity bear super-cycle; low and range-bound price action ($30 to $60), as the market recalibrates,” said Wells Fargo Investment Institute Head of Real Asset Strategy John LaForge, noting that Phase 1 was represented by the oil price crash between 2014 and 2016.

What makes the Permian Basin so important

Land prices have risen sharply in the oil-rich Permian Basin, ranging from $32,000-$54,000 per acre, but Seaport Global Securities’ managing director and head of exploration and production research Mike Kelly said “the Permian deserves every ounce of investor love.” Kelly said money keeps flowing into the Permian because of the multiple zones that can offer returns at $40-per-barrel oil and potentially produce wells yielding 3 million barrels in estimated oil recoveries, while prices per acre could hit $223,000 in the future, making present investments in the Permian look cheap.

Edge Natural Resources Rakes In $650M For 2nd Fund

Dallas-based private equity firm Edge Natural Resources LLC, has closed its second fund after collecting $650 million from limited partners, the firm said on Tuesday, with plans to invest in North American gas and oil companies.

Surge in crude production pushes US petroleum exports to record

Government data show the US exported a record of 5.69 million barrels of crude and petroleum products per day in January as crude production for the month climbed to 8.84 million barrels per day. Crude exports were up 69% to 746,000 barrels per day.

Texas oil production growing faster than pipelines can handle

West Texas drillers are facing a shortage of pipeline space as the state’s pipeline network is unable to keep up with the fast-growing oil production in the region. This threatens to lower crude prices just like what happened three years ago, with West Texas Intermediate crude at Midland, Texas, already having dropped to its lowest level since September.

Bonanza Creek Defends Ch. 11 Plan Ahead Of Confirmation

Bankrupt oil driller Bonanza Creek Energy Inc. defended its proposed Chapter 11 plan of reorganization Friday, saying the company’s debt-for-equity swap with noteholders enjoys widespread support among most parties, except for a group of equity holders opposing the plan.

Chevron steps up Permian Basin development efforts

Chevron is shelving plans for new multibillion-dollar projects and increasing its bets on US shale, with Chevron Chairman and CEO John Watson saying that shale plays are now some of the best assets in the company’s portfolio. Chevron controls 2 million, mostly royalty-free acres in the Permian Basin, which could yield over 700,000 barrels of oil per day within a decade — eight times more than current production volume.

Oilfield investments grew to 5-year high after OPEC deal

US oil companies raised capital spending by $4.9 billion combined in the fourth quarter of 2016, which represents an increase of 72% compared with the fourth quarter of 2015 and the biggest increase in five years, according to the Energy Department. Before the recovery, combined oilfield spending for the 44 oil producers reviewed by the Energy Department had dropped by $475 million partly because of reduced oil production.

Oil majors having a hard time balancing the books

Big Oil companies such as Chevron, ExxonMobil, BP and Royal Dutch Shell failed to turn a profit or at least become cash-flow neutral in 2016 and ended the year with more debt than they had at the beginning of it, a Wall Street Journal analysis shows. The hefty dividends the companies pay to shareholders, which are at the same level they were when oil prices were above $100, and capital investments are two factors weighing on their finances.

Production costs drop in Permian Basin

The $36-per-barrel cost of oil production in the Permian Basin’s Midland region in Texas is about half of what it was in 2014. The Permian contains almost half of all rigs operating in the US and leads other US shale fields in cost savings, which resulted from lower drilling prices and more efficient operations.

Lower 48 natural gas production continues to fall

The Lower 48 states produced 78.3 billion cubic feet of natural gas per day in January, down from 78.7 billion cubic feet per day in December, marking the second consecutive month of declines, according to the Energy Information Administration. Output declined in Texas and Oklahoma, but remained steady in Pennsylvania.

Seadrill Says Future Could Include Ch. 11

Offshore driller Seadrill Ltd. is likely facing a formal restructuring in coming months, even as lenders have cooperated to push back impending maturation dates on $2.9 billion worth of debt, it said Tuesday.

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Closing Thought: “We are kept from our goal not by obstacles but by a clear path to a lesser goal.” ~Robert Brault

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PROMINENT OILMEN

Another story we release every other week in Friday Snippets is a look back at prominent Oklahoma oilmen who have helped create, shape and transform the oil and gas industry in Oklahoma.

This weeks new presentation is on E. W. Marland, a man who made fortunes in oil in Pennsylvania in the 1900s and in Oklahoma in the 1920s, and lost each in the volatility of the industry and the times. He became a politician who was a U.S. Congressman and Oklahoma governor.

We have a long list of historical characters we will be presenting but we welcome any suggestions of someone you would like to see featured.

STORIES & LEGENDS SERIES ABOUT OKLAHOMA OILMEN: E. W. Marland

March 31, 2017

The market is dealing with fears of oversupply as OPEC struggles to tighten the oil market because inventories in many parts of the world are at, or near record highs and as U.S. production rises.

Both WTI and Brent have traded more than 6% lower year to date but oil prices climbed for a third day onThursday to their highest in three weeks after Kuwait gave its backing for an extension of OPEC production cuts in an attempt to reduce global oversupply.

Kuwait oil minister Essam al-Marzouq said his country was among several nations supporting the extension of a deal between OPEC and other exporters to limit output, state news agency KUNA reported.

Data from the U.S. Energy Information Administration released Wednesday revealed an increase in domestic-crude supplies to another record, but also showed larger-than-expected declines in gasoline and distillate supplies and refiners processing oil at a higher rate.

Drilling Continues

According to Baker-Hughes, as of March 24 there were 809 rigs operating in the United States, and 49.9 percent of them were drilling in Texas.

Of the 404 rigs currently making holes in Texas, 77 percent of them are working in the Permian Basin — 313 rigs total.

Those numbers represent an increase at every level over last year’s count.

At this time last year, there were 464 rigs operating in the U.S., with 209 in Texas; 70 percent of rigs at that time were drilling in the Permian Basin (147).

Takeaway: Oil and gas activity is continuing to grow even with low oil prices.

Factoid: Sand costs now represent 30% to 60% of frack costs per stage and are set to become nearly 15% of well costs by 2018.

Closing Oil and Gas Prices, Thursday, March 30th

Oil prices rose for a third straight session Thursday, with U.S. benchmark crude topping $50 a barrel. Brent crude closed at $53.13 per barrel (bbl). U.S. West Texas Intermediate crude closed at $50.35/bbl, after touching $50.46.

Remember when: Oil hit a 13-year low of just above $26 a barrel in February 2016.

Natural Gas News

U.S. natural gas futures declined on Thursday, holding on to losses after data showed that natural gas supplies in storage in the U.S. fell broadly in line with market expectations last week.

U.S. natural gas for May delivery settled down at $3.19 per million British thermal units.

The U.S. Energy Information Administration said in its weekly report that natural gas storage in the U.S. declined by 43 billion cubic feet in the week ended March 24, compared to forecasts for a drop of 42 billion.

Now For This Week’s Snippets:

US drillers rush to hedge higher oil prices

Hedging activity surged by 33%, or 648,000 barrels a day of new oil hedges, in the fourth quarter of 2016 from the third quarter as US oil producers sought to protect themselves against any losses caused by prices below $50 a barrel by locking in higher prices between $50 and $60 a barrel for their oil, according to a Wood Mackenzie analysis of 33 producers. However, the consultancy warned that the surge in hedging will likely worsen the oil supply glut as drillers continue to ramp up production.

Supercomputer helps ExxonMobil optimize efforts

ExxonMobil is using a supercomputer with 716,800 processors to simulate reservoirs. The simulations, which show rock and fluid conditions over the drilling period of an oil or natural gas field, help the company plan more efficiently and make better predictions.

Okla. Tribal Landowners Get Pipeline Kicked Off Property

An Oklahoma federal judge on Tuesday ordered Enable Midstream Partners LP to remove a natural gas pipeline from land held in trust for a group of tribal landowners by the federal government, ruling that the company is liable for trespassing on the landowners’ property.

Keystone Challengers Unlikely To Trump Presidential Permit

President Donald Trump’s approval of a cross-border permit for the Keystone XL pipeline will ignite a lengthy legal firestorm over the controversial project, but experts say overturning the presidential permit will be difficult for pipeline opponents and a better chance of success lies in challenging federal environmental permits and state-level actions.

Number of drilled but uncompleted wells reaches record

US shale producers are leaving thousands of wells unfinished in the Permian Basin, with the number of drilled but uncompleted wells hitting a record of 1,764 in February, government data show. This suggests that rig count data is not a reliable indicator of production as many companies drill wells just because they are forced to do so to retain their leases.

Anadarko cuts jobs after Eagle Ford asset divestiture

Anadarko Petroleum cut 60 jobs last week following the company’s sale of its Eagle Ford Shale assets to Sanchez Energy and the Blackstone Group for $2.3 billion. The asset package included 155,000 net acres in Texas’ Dimmit and Webb counties with daily production of 45,000 barrels of oil and 131 million cubic feet of natural gas.

Samson, Magnum Hunter End $17M Claims Fight In Del. Ch. 11

Samson Resources Co. withdrew more than $16.8 million in oil and gas well claims against a bankruptcy successor to Magnum Hunter Resources late Thursday, citing an earlier settlement deal to wind up loose ends trailing both companies’ confirmed Chapter 11 reorganization plans.

Haynesville Shale activity surges again

Activity at the Haynesville Shale in northwest Louisiana and eastern Texas dropped off in recent years because of lower-cost natural gas supplies elsewhere, but activity has been renewed thanks to pipeline complications in the Northeast. Gas rates have gone up and rig counts have increased to 37 since November at the formation, which produces about 6.3 billion cubic feet of gas per day and is estimated to hold almost 500 trillion cubic feet.

Shell, Anadarko reflect on Permian joint venture

Royal Dutch Shell and Anadarko Petroleum may decide against renewing their 10-year Permian Basin joint venture agreement, set to expire this summer, in a bid to accelerate development of their respective activities in the area. One proposed course of action involves dividing the land between the two sides into “two 100% owned and operated parcels,” said Greg Guidry, head of Shell’s unconventional business.

JV announced by Schlumberger, Weatherford

Oilfield service giants Schlumberger and Weatherford on Friday announced OneStim, a North America-focused joint venture that will provide services and technologies related to the process of producing shale oil and natural gas, such as hydraulic fracturing. The joint venture will be 70% owned by Schlumberger, with Weatherford set to receive $535 million from its joint venture partner.

Devon Energy looks to double number of US rigs

Devon Energy plans to have 20 rigs by the end of 2017, up from 10 in 2016, but said it will double its rig count without hiring new employees or increasing administrative costs. “If we are fortunate enough to have the right commodity price environment where we can continue to expand the capital program in 2018, we see very little need for increased staffing in order to accomplish that,” said Devon CEO and President Dave Hager.

US on track to become net natural gas exporter in 2018

The US in 2018 is expected to become a net exporter of natural gas for the first time in six decades and earn the title of the third-largest liquefied natural gas exporter in the world, all thanks to the shale revolution. LNG export capacity in the contiguous 48 states is seen topping 6 billion cubic feet per day by the end of 2018, representing 8% of domestic consumption.

Permian drillers evade acquisition costs by trading land

Instead of paying as much as $60,000 per acre in the Permian Basin, shale drillers such as Parsley Energy, Double Eagle Energy Permian and Pioneer Natural Resources are rushing to trade land with competitors in win-win deals that allow them to drill longer laterals while preserving the value of their acreage. Double Eagle co-founder and co-CEO John Sellers said land, not money, is the real currency in the Permian, adding that “you have to have acreage they need as much as you need acreage from them.”

Permian may be more promising than Eagle Ford for ConocoPhillips

ConocoPhillips controls 200,000 net acres in the Eagle Ford, and although it’s not the biggest position compared with other companies, it’s probably the best, boasting 3,500 remaining drilling locations profitable under $50 a barrel with an estimated resource potential of 2.4 billion barrels of oil equivalent, writes Matthew DiLallo. Conoco’s 1 million-acre position in the Permian Basin may hold even more potential and become the company’s future growth driver, especially considering that its 75,000-acre foothold in the Delaware Basin is estimated to hold 1.8 billion barrels of recoverable resources profitable under $50 a barrel.

PROMINENT OILMEN

Another story we release every other week in Friday Snippets is a look back at prominent Oklahoma oilmen who have helped create, shape and transform the oil and gas industry in Oklahoma.

This weeks presentation is on Robert Hefner III, the father of deep natural gas and great prognosticator of the Anadarko Basin. We have a long list of historical characters we will be presenting but we welcome any suggestions of someone you would like to see featured.

STORIES & LEGENDS SERIES ABOUT OKLAHOMA OILMEN: Robert Hefner III

March 24, 2017

OIPA presents awards to Oklahoma energy industry leaders

The Oklahoma Independent Petroleum Association’s Wildcatters Gala was held at the Skirvin Hotel in Oklahoma City this week and recognized Aubrey McClendon’s role in launching the American energy renaissance as co-founder of Chesapeake Energy Corp.

A “short memory and a thick skin” were among the traits that made Aubrey McClendon an energy industry leader, Jack McClendon said of his late father Tuesday evening as he accepted a “legend of the industry” award on behalf of the McClendon family.

“My father was a visionary who early on recognized that, by combining horizontal drilling and hydraulic fracturing techniques, we could commercially develop the bountiful, unconventional oil and natural gas resources in our country,” McClendon said. “He combined that vision with his indomitable work ethic to help revolutionize the U.S. energy industry, much to the chagrin of the industry naysayers and others who doubted that the vast amount of hydrocarbons trapped in tight rock could be unlocked.”

Jeff McDougall, OIPA chairman and president and owner of JMA Energy Co., introduced a video honoring Aubrey McClendon’s leadership and philanthropy with remembrances from friends, colleagues and elected officials.

Aubrey McClendon died in an automobile crash in Oklahoma City in March 2016. He was 56.

Factoid: US independence on imported oil peaked in 2005.

Closing Oil and Gas Prices, Thursday, March 23rd

Oil prices extended their streak of losses on Thursday, as traders focused on the persistent oversupply of crude in the global market that has weighed on prices in recent years.

Oil prices saw a late-session surge on Wednesday, but still closed lower. Data early Wednesday from the U.S. Energy Information Administration showed that U.S. crude supplies rose by 5 million barrels to a record high of 533.1 million barrels.

On Thursday, May West Texas Intermediate crude CLK7 settled at $47.70 a barrel on the New York Mercantile Exchange. May Brent crude LCOK7 closed down at $50.56 a barrel on London’s ICE Futures exchange.

Natural Gas Outlook

Natural gas inventories and prices
Natural gas prices are impacted by the spread between natural gas inventories and their five-year average. Over the past ten years, whenever natural gas inventories have been higher than their five-year average, prices have fallen.

Recent natural gas inventories and prices
Last winter, natural gas usage for heating was weak due to mild temperatures. At the end of March 2016, US natural gas inventories were at 2.5 trillion cubic feet—67.0% higher than the levels in 2015 and 53.0% higher than the five-year average. As a result, natural gas futures hit a 17-year low of $1.64 on March 3, 2016.

At the start of the injection season on April 1, 2016, the spread between natural gas inventories and their five-year average was at its widest since April 2012. However, the spread narrowed in subsequent months. In the week ending on December 16, 2017, inventories fell below their five-year average for the first time in 19 months. Natural gas active futures prices rose 53.9% between April 1, 2016, and March 22, 2017.

The spread reversed in the week ending January 27, 2017. During the week ending March 10, 2017, natural gas inventories were at 2,242 Bcf—21.4% more than the five-year average. In the six weeks since the reversal, natural gas prices have lost 11.2%. However, inventories are 9.5% lower than they were last year, which should ensure that prices don’t fall to the lows we saw at that time.

Now For This Week’s Snippets:

IPO activity across US shale industry to spike in 2017

The number of drillers, oilfield service companies and pipeline operators expected to go public this year could surge to 30, with a combined value estimated at $8.5 billion, which is close to four times more than in 2016, according to Credit Suisse. Oilfield service companies are expected to account for half of the initial public offerings.

US shale gas commands record prices overseas

Importers of US shale gas paid a record of $7.52 per million British thermal units of liquefied natural gas shipped from Cheniere’s Sabine Pass export terminal in January, up from a high of $6.21 last year. The volume of LNG exported in January and February also climbed to a record of 15 tankers, headed mainly to Mexico, China, Japan and Jordan.

Phillips 66 unveils plans to build Rodeo pipeline in Permian

Houston-based Phillips 66 has announced the Rodeo project, a 130-mile pipeline that would transport oil from Texas’ Reeves County in the Permian’s Delaware sub-basin to the Odessa-Midland area. The pipeline will have an initial capacity of 130,000 barrels of crude per day and is expected to be completed in the second half of 2018.

Kinder Morgan to build natural gas pipeline in Permian Basin

Kinder Morgan on Wednesday unveiled plans for a 430-mile, 42-inch pipeline that would transport natural gas from Waha, Texas, in the Permian Basin to Agua Dulce in the Corpus Christi area. The project is expected to be completed in late 2019.

Marathon Oil boosts Permian position in $700M deal

Marathon Oil announced plans to acquire 21,000 net acres in the Northern Delaware Basin of the Permian Basin for $700 million in a move that will boost its Permian foothold to 90,000 net acres. News of the acquisition comes less than two weeks after Marathon said it would pay $1.1 billion for over 70,000 net acres in the Permian.

EIA: US crude production decreased in 2016

The US produced an average of 8.9 million barrels of crude oil per day in 2016, down from 9.4 million barrels of oil per day in 2015, despite production growth in the Permian Basin and record high average daily output in the Gulf of Mexico, according to the Energy Information Administration. US crude exports surged 12% to 520 thousand barrels of oil per day, while inventories rose by 35 million barrels to 484 million barrels by the end of the year.

Oil majors are doubling down on US shale

Big oil companies such as Chevron, ExxonMobil and Royal Dutch Shell are leaving huge projects behind in favor of fast-growing US shale with plans to invest a combined $10 billion in US shale fields in 2017, up from close to zero a few years ago. This shift will likely raise US production further, keeping oil prices down, and transform US shale with projects such as the Bongo 76-43 in the Permian Basin, where Shell plans to break with tradition and drill five wells in a single pad for the first time.

Goldman Sachs warns of oil oversupply

The US shale revival along with new oil production projects could add one million barrels of extra oil per day, potentially causing an oversupply in the next two years, Goldman Sachs said in a research note. Over the next two years we are “likely to see the largest increase in mega projects’ production in history, as the record 2011-13 capex commitment yields fruit,” the bank wrote.

Texas High Court Weighs Eagle Ford Deed Royalty Dispute

Texas Supreme Court justices on Wednesday wrestled with whether they should overturn decades-old precedent as they interpret an Eagle Ford property deed that granted oil and gas interests and has spurred competing royalty claims.

PROMINENT OILMEN

Another story we release every other week in Friday Snippets is a look back at prominent Oklahoma oilmen who have helped create, shape and transform the oil and gas industry in Oklahoma.

This weeks presentation is on Robert Hefner III, the father of deep natural gas and great prognosticator of the Anadarko Basin. We have a long list of historical characters we will be presenting but we welcome any suggestions of someone you would like to see featured.

STORIES & LEGENDS SERIES ABOUT OKLAHOMA OILMEN: Robert Hefner III

March 17, 2017

Too Many Headwinds To ExxonMobil/BP?

U.S. energy giant ExxonMobil (NYSE:XOM) has reportedly gauged potential interest among BP’s major shareholders regarding a possible takeover, British newspaper Evening Standard reported on Friday, sending BP’s stock (NYSE:BP) soaring to one-month highs in London and trading nearly 3 percent higher in New York shortly after opening.

Analysts say the two companies would face massive antitrust headwinds in the wake of Brexit and combined with the high debt of BP, especially when viewed relative to cash flow, creates a massive headwind to acquisition.

U.S.-based Chevron is also reportedly among “other interested parties”, Evening Standard said, noting that Exxon and BP said that they do not comment on speculation.

Court approves Chaparral exit plan from bankruptcy

A judge has approved Chaparral Energy Inc.’s plan to exit bankruptcy, wiping out $1.2 billion in debt from the Oklahoma City-based company. Chaparral expects to emerge from bankruptcy by the end of March, the company said Monday.

Under the plan, Chaparral’s unsecured bondholders and general unsecured creditors will own all of the company’s ownership interest, subject to some dilution.

Chaparral said it expects to have liquidity of more than $100 million when it emerges from bankruptcy. The oil and natural gas producer filed for bankruptcy reorganization in May.

Chaparral, founded in 1988, has focused its operations in Oklahoma’s fast-growing STACK play. The company also is the third-largest oil producer in Oklahoma.

Factoid: The United States leads the world in total daily petroleum production (petroleum + liquids), ahead of Saudi Arabia and Russia.

Closing Oil and Gas Prices, Thursday, March 16th

Oil prices on Wednesday climbed for the first time in more than a week on a surprise drawdown in U.S. crude inventories and data from the International Energy Agency (IEA) suggesting OPEC cuts could create a crude deficit in the first half of 2017.

Those increases pushed both Brent and WTI out of technically oversold territory for the first time in six days

Natural Gas News

So far this year, natural gas has performed the worst among major commodities, posting significant losses in January and February. It has rebounded somewhat in the last few weeks, but hovering around $3 per MMBtu, gas prices are still sharply lower compared to the fourth quarter of last year.

“It’s a real risk that a year from now that prices could be below $2,” Brandon Blossman, a managing director at Tudor Pickering Holt, said in a Bloomberg interview. “You have this unfortunate confluence of Permian production ramping right into the teeth of a lot of new takeaway capacity in the Northeast.”

Now For This Week’s Snippets:

US shale drillers unfazed by oil price drop

Oil prices would have to fall to $30 per barrel or less to hurt the finances of US shale producers because many of them, including Pioneer Natural Resources and Parsley Energy, are well-hedged against potential market crashes for the next several years, according to Katherine Richard, founder and CEO of Warwick Energy Investment Group. Richard says oil prices will likely continue to fall over the next few months, but companies operating in the most lucrative shale plays will not be affected.

Pioneer Natural Resources Sells Midland Acreage in $266 Million Deal

Pioneer Natural Resources Co. (NYSE: PXD) continues to high-grade its Midland Basin acreage with the sale of acreage in northeastern Martin County, Texas. Pioneer said an undisclosed buyer will acquire the acreage with an average production of about 1,500 barrels of oil equivalent per day for $266 million. The sale of the Martin acreage comes after January agreements to sell 5,600 net acres in Upton and Andrews counties, Texas for $63 million in gross proceeds.

Increased drilling efficiency putting pressure on prices

US oil and natural gas companies’ rush to lower break-even costs is also putting downward pressure on oil prices. US shale break-even prices have fallen by 46% between 2014 and 2016, but Ernst & Young’s Deborah Byers notes that “everyone is driving break-even prices down,” including deep-water and conventional companies.

US faces shortage of pipeline inspectors

There are 528 government inspectors overseeing the US’ 2.7 million-mile pipeline network, which means that each inspector is responsible for more than 5,000 miles of pipeline. The country’s sprawling network is set to expand by 1,499 miles after the Keystone XL and the Dakota Access pipelines are completed, but it’s still unclear whether the Pipeline and Hazardous Materials Safety Administration will hire new inspectors.

Gas production out of Permian poised to surge dramatically

Tudor Pickering Holt & Co. predicted that an upsurge in drilling activity in the Permian Basin will lead to a 25% increase in natural gas production out of the US’ hottest shale play over the next year, which threatens to send natural gas prices below $2 per million British thermal units. Natural gas production is also accelerating in the Marcellus Shale in Pennsylvania and West Virginia.

Signs of oil market upturn increasingly evident in Texas

The Railroad Commission of Texas reported four oil and natural gas discoveries in Texas in February, up from two in January, and said it issued 991 original drilling permits during the month, compared with 573 in February 2016. However, Texas Alliance of Energy Producers economist Karr Ingham points out that oil production and employment are still weaker compared with a year ago, raising questions about Texas’ future growth.

Trump’s tax plan could be windfall for US drillers

US oil drillers could save up to $10 billion per year as a result of President Donald Trump’s proposed corporate tax cuts, with the extra cash expected to go toward drilling, leading to an upsurge in activity. The Trump administration plans to cut the corporate tax rate to 15% or 20%, down from the current 35%, but it’s unclear when a reform bill will be enacted as there are many challenges.

Noble Energy to cut 197 positions in Texas

Noble Energy announced plans to shut down Clayton Williams Energy’s office in Midland, Texas, by year’s end and lay off about 197 Clayton employees starting in May after its $2.7 billion merger with Clayton Williams is finalized. Noble may choose to keep some of the employees, especially field workers.

Industry CEOs expect natural gas demand to continue

Oil and natural gas industry CEOs told the CERAWeek by IHS Markit conference last week they expect to see continued global demand for natural gas, though production might not be able to keep up. The executives also discussed exploration and production technology, as well as the political climate.

Making a case for natural gas as energy future of US

Market forces dictate that natural gas, not coal, will power America in the future, even though President Donald Trump is pushing to bring back coal. Natural gas was the top electrical power source in the US in 2016 as utility companies increasingly prefer gas over coal because it has become cheaper thanks to the shale boom, is cleaner than coal, benefits from better technology and is in high demand overseas.

PROMINENT OILMEN

Another story we release every other week in Friday Snippets is a look back at prominent Oklahoma oilmen who have helped create, shape and transform the oil and gas industry in Oklahoma.

This weeks presentation is on Charles Page, oilman, industrial developer, philanthropist, and father of Sand Springs, Oklahoma. We have a long list of historical characters we will be presenting but we welcome any suggestions of someone you would like to see featured.

STORIES & LEGENDS SERIES ABOUT OKLAHOMA OILMEN: Charles Page

March 10, 2017

WTI plunges 5% to year-low on oversupply fears

The price of U.S. crude oil has dipped below $50 for the first time since December as a global supply glut persists despite production cuts by big exporters.

Just when oil prices seemed high enough to spur a sustainable revival in domestic drilling, a surge in U.S. petroleum stockpiles and a warning from Saudi Arabia’s energy minister pushed them sharply lower this week.

Senior Saudi energy officials told top independent U.S. oil firms in a closed-door meeting this week that they should not assume OPEC would extend output curbs to offset rising production from U.S. shale fields, two industry sources said on Thursday.

The Saudis called the meeting to exchange views on the market and to gauge the outlook for shale output, both sources said.

Speaking at an industry conference in the U.S. energy capital of Houston on Tuesday, Saudi Arabia’s Energy Minister Khalid al-Falih said that there would be no “free rides” for U.S. shale producers benefiting from the upturn.

Harold Hamm, the billionaire shale oilman, said the U.S. industry could “kill” the oil market if it embarks into another spending binge, a rare warning in a business focused on fast growth to compete with OPEC.

The statement by Mr. Hamm, who is attending the same conference in Houston, comes as top shale companies announce large increases in spending for this year, and the U.S. government says domestic oil output next year will surpass the record high set in 1970. OPEC ministers have said they are keeping a close watch on shale production to decide in late May whether to extend their oil-supply cuts into the second half of the year.

Factoid: What’s lighter than air? Natural gas.

Speculators head for the door, hastening the falling oil price…

Speculators have started exiting the nearly record long positions in oil futures that they had amassed. “It’s a combination of an overhang of (speculative) length and the overhang in inventories … and the other thing unnerving the market is rapid growth in U.S. crude production,” Andrew Lebow, senior partner at Commodity Research Group in Darien, Connecticut, told Reuters on Wednesday.

Closing Oil and Gas Prices, Thursday, March 9th

Natural Gas News

Warmer than normal weather throughout much of the United States resulted in the first recorded net natural gas injection during a week in February since weekly storage data has been collected.

For the week ending February 24, the amount of natural gas in storage in the Lower 48 states increased 7 billion cubic feet (Bcf). While some weeks during March in previous years had recorded injections, net injections of natural gas into storage do not typically occur until at least April.

Now For This Week’s Snippets:

OPEC, US shale producers find common ground in Houston

OPEC Secretary-General Mohammed Barkindo and about 20 US shale executives attended a dinner event in Houston on Sunday during which they reportedly agreed that oil market balance would benefit both sides. However, the shale producers said they didn’t want to miss out on the growth opportunity in front of them, but Barkindo said OPEC will continue to fight for higher oil prices even if shale companies get rich in the process.

API reports bigger-than-expected surge in US crude supplies

US crude stockpiles climbed by 11.6 million barrels in the week ended March 3, compared with analyst estimates for a 1.6 million-barrel build. Gasoline inventories fell by 5 million barrels while distillates declined by 2.9 million barrels.

EIA revises up US oil production forecasts

The Energy Information Administration raised its US crude oil output predictions to an average of 9.21 million barrels per day in 2017 and 9.73 million barrels per day in 2018. That’s up from previous estimates of 8.98 million for this year and 9.53 million for 2018, respectively.

Higher frac-sand prices put pressure on shale drillers’ cash flows

Growing demand from shale drillers has spurred a rebound among producers of sand used in the hydraulic fracturing process, while pushing frac-sand prices to new highs, which in turn is hurting shale drillers’ cash flows. An ordinary well in the Permian Basin could require between $800,000 and $1 million worth of frac sand by late 2017, up from $350,000 last year.

US shale breakeven prices are higher than thought, KLR Group says

Research by KLR Group claims that the breakeven prices for US shale are $50 per barrel of oil and $3.35 per thousand cubic feet of natural gas, well above other estimates. The lowest breakeven prices for oil are achieved in the Permian’s Midland basin and the eastern Eagle Ford, while the Marcellus Shale has the lowest breakevens for natural gas.

ExxonMobil to spend $20B on Gulf Coast downstream projects

ExxonMobil on Monday announced plans to invest $20 billion to build chemical and oil refining plants along the US Gulf Coast through 2022. The plan consists of 11 projects, some of which are already underway, and is expected to create 47,000 temporary and permanent jobs, according to ExxonMobil Chairman and CEO Darren Woods.

Halcon Resources expands Permian footprint

Halcon Resources will pay $22.3 million to acquire 594 acres and 160 barrels of oil equivalent per day in the Permian’s Delaware sub-basin in Pecos County, Texas, adding to the 20,901 net acres it already owns in the county. Halcon also has the option to acquire 15,040 net acres in Ward County, Texas, for $11,000 per acre.

Goldman Sachs predicts oil undersupply in 2017

A report from Goldman Sachs forecast that global oil supply will lag demand in the second quarter of 2017, mainly because of OPEC’s production cuts and some declines in US output. Demand will overtake supply by 170,000 barrels for the year, the report said, but it warned that US shale could push supply above demand again.

Challenges made US shale industry stronger, more efficient

Over 100 shale drillers went bankrupt in the past two years, but those that survived the downturn have emerged stronger, more efficient and more cost-effective and are able to thrive with oil at $55 per barrel. The US rig count climbed by 91% to 602 in the past nine months, production surged by over 550,000 barrels per day since summer 2016 and North American oil companies, including oil giants that shunned shale during the first boom, plan to boost spending by 25% this year.

Shale drillers’ efficiency threatened by soaring costs

Oilfield service and equipment companies are finding it increasingly difficult to hire workers and keep commitments, tightening the supply of services and equipment and leading to higher costs for producers. Drillers face costs of more than $20,000 per day to rent a rig from the biggest land-rig contractor, Nabors Industries, while the average price for a ton of frac sand supplied by US Silica Holdings has climbed 20% to $35.

Permian companies face challenges over wastewater injection

Companies operating in the Permian Basin might need to find new ways to dispose of wastewater resulting from the hydraulic fracturing process because it “will be a huge issue past a certain amount that you can inject,” said BHP Billiton Asset President of Shale Alex Archila. Another challenge for Permian companies is obtaining enough water for fracking, according to Archila.

Resolute Energy acquiring Permian acreage in $160M deal

Resolute Energy has agreed to buy an asset package that includes 4,600 net acres in the Permian’s Delaware sub-basin, two horizontal wells and six drilled but uncompleted wells for $160 million. “The acreage to be acquired is adjacent to our Appaloosa project area and immediately north of our Mustang project area, and 95% of the acquired acreage will be operated by Resolute,” said Resolute CEO and Director Rick Betz.

MMEX Resources to build $450M crude refinery in the Permian

Austin, Texas-based MMEX Resources wants to build a $450 million crude oil refinery in the Permian Basin on a 250-acre site in Pecos County, a project that would create about 500 temporary and permanent jobs. The construction of the refinery, which would have a capacity of 50,000 barrels per day, is expected to begin in 2018 and be completed in 2019.

PROMINENT OILMEN

Another story we release every other week in Friday Snippets is a look back at prominent Oklahoma oilmen who have helped create, shape and transform the oil and gas industry in Oklahoma.

This weeks new presentation is on Charles Page, oilman, industrial developer, philanthropist, and father of Sand Springs, Oklahoma. We have a long list of historical characters we will be presenting but we welcome any suggestions of someone you would like to see featured.

STORIES & LEGENDS SERIES ABOUT OKLAHOMA OILMEN: Charles Page

March 3, 2017

EIA: US crude stockpiles surge to record high

The Energy Information Administration reported the eighth straight week of build, with a build of 1.5 million barrels in U.S. oil inventories, compared to analysts’ expectations for the growth of 1.3 million barrels. This moved inventory levels to an all-time high of 520.2 million barrels in the week ended Feb. 24. Gasoline inventories dropped by 546,000 barrels, while distillates declined by 925,000 barrels.

The latest growth in oil stockpiles was driven by increased imports from Saudi Arabia, Canada and Iraq, while domestic production was also standing above 9 million barrels.

The U.S. oil production increases have turned out to be a big threat for price stabilization despite massive production cuts from OPEC and 11 non-OPEC players. Moreover, U.S. production could expand at a significantly higher rate in the coming months, as North American and global players are increasing their drilling programs in the key U.S. oil plays.

In the last two consecutive months, OPEC producers indicated production compliance above 90%, strengthening future fundamentals for prices. In the short-term, U.S. oil production and the U.S dollar could pressure oil prices.

Factoid: John Rockefeller. He founded Standard Oil in 1870, at the age of 31, and bought up most of the oil refineries in the United States, eventually controlling about 90% of the American oil business.

Brigham Resources Operating, LLC and Brigham Resources Midstream, LLC (collectively “Brigham Resources”) announced that it has closed the sale of substantially all of its southern Delaware Basin assets for $2.55 billion to Diamondback Energy, Inc.

Brigham Resources has closed the sale less than four years after receiving its initial private equity commitment in April 2013. The sale to Diamondback included the following assets: 80,185 net leasehold acres in Pecos and Reeves counties, 48 Brigham operated producing horizontal wells accounting for the bulk of its southern Delaware Basin production, 170 miles of natural gas and water gathering and water recycling infrastructure supporting its producing wells, and 5,745 net mineral acres (assuming an average 23% royalty) underlying Brigham Resources’ operated leasehold acres or where its ownership will give Diamondback the right to operate.

Was Aubrey McClendon a Billionaire, or Broke?

On the anniversary of his death yesterday, the Wall Street Journal published an article noting that “lawyers in Oklahoma City are sifting through the tangle of obligations and assets he left behind, trying to determine if he died a wealthy man—or swamped by debt.”

There isn’t much comprehensive historical data on probate cases, but attorneys say that Mr. McClendon’s estate is surely one of the largest and most complex ever to wind through probate.

Read the full article here: https://t.co/USHlf7hLdD

Closing Oil and Gas Prices, Thursday, March 2nd

Oil prices headed lower for a third consecutive session on Thursday to log their lowest finish in about three weeks. Crude oil prices continue to trade in the range of $5 over the last two months, while higher than expected growth in U.S. oil production lowers their potential to breach the recent trading range. U.S. crude oil closed at $52.61 a barrel on Thursday. Brent crude also declined to close at $55.08 a barrel.

Natural Gas Outlook

U.S. natural gas prices have fallen 30% since the start of the year as demand this winter fell to the lowest in four years due to the warmest weather on record in December, January and February.

Since the start of the year, gas futures have collapsed by 30%, with the April contract closing yesterday $2.80 per million British thermal units (MMBtu) from a two-year high of $3.994/MMBtu on Dec. 28.

SandRidge Energy Acquires STACK Acreage

Halcón Picks Up New Delaware Deal As It Closes Another

The company said it closed its $705 million acquisition and had picked up additional interest in Pecos County, Texas, for $22.3 million. On Feb. 28, the company closed its acquisition of Samson Exploration LLC’s Pecos County, Texas, acreage and in the interim agreed to buy additional interests from a nonoperating owner in the acreage for $22.3 million. The “incremental acquisition” includes 594 additional net acres and average production of about 160 barrels of oil equivalent per day (boe/d). The deal is expected to close in early March.

Post Oak Capital Invests $100 Million in Mineral Fund

Post Oak Energy Capital, LP announced that it led a $100 million equity commitment to Saxet II Minerals, LLC. The management team will co-invest alongside Post Oak. Saxet II Minerals, LLC is the second partnership with Post Oak; the first iteration has aggregated a position of mineral and royalty interests primarily in the SCOOP/STACK play in Oklahoma and the Midland Basin in West Texas.

Current shale boom enjoys greater momentum than first one

US shale companies have increased production by an average of 125,000 barrels per day every month since a September 2016 low, compared with an average monthly increase of 93,000 barrels per day during the first shale boom between 2011 and 2015. This suggests that the current US shale upturn is more powerful than the previous shale boom and particularly dangerous for OPEC’s plans to balance the global oil market with production cuts.

Oil companies plan more drilling in Okla.

Some of the biggest oil and natural gas producers in Oklahoma say they’ll step up their efforts this year after suffering a downturn last year. They’ve cut costs and reduced debt by drilling fewer wells, speeding up drilling time and making better use of sand in the hydraulic fracturing process.

Hi-Crush Partners to buy Permian Basin Sand in $275M deal

Houston-based oilfield services firm Hi-Crush Partners agreed to acquire frac sand provider Permian Basin Sand for $275 million to take advantage of the soaring demand for hydraulic fracturing sand in the Permian. As part of the deal, Hi-Crush will take over Permian Basin Sand’s 1,226-acre sand reserve, which contains over 55 million tons of sand.

Australis to pay $80M for Encana US shale assets

Australian oil and natural gas company Australis agreed to acquire Encana’s assets in the Tuscaloosa Marine Shale along the Louisiana and Mississippi border for $80 million. The asset package includes 122,000 acres and interests in 47 wells with an output of 1,900 barrels per day.

Exporters ship record volume of US crude

The volume of US crude for export reached a record 1.21 million barrels per day in the week ended Feb. 17, the most since 1993, with the Far East as the main destination. “As output moves from 9 million barrels a day to 9.3 million or 9.4 million, three-quarters of that increased output will be for export,” said Gary Morgan, Clarksons Platou Shipping Services USA Analyst Group director.

Oil majors prioritize US shale over Canadian oil sands

An increasing number of major oil companies are shelving their Canadian oil sands projects to pursue more lucrative opportunities in US shale plays, which are less expensive and provide faster profits. ExxonMobil and ConocoPhillips recently de-booked almost 5 billion barrels combined of bitumen at their Alberta oil sands projects, while Statoil and Royal Dutch Shell also abandoned similar projects.

PROMINENT OILMEN

Another story we release every other week in Friday Snippets is a look back at prominent Oklahoma oilmen who have helped create, shape and transform the oil and gas industry in Oklahoma.

The current presentation is on Charles Colcord (1859-1934), a successful cattle rancher, U.S. Marshal, Chief of Police, businessman, and oil man. We have a long list of historical characters we will be presenting but we welcome any suggestions of someone you would like to see featured.

February 24, 2017

STACK INTEREST GROWS

Zell, founder of Equity Group Investments Inc., made an investment in the region this week and sees “awesome” prospects for the oil-producing area, he told Alix Steel, David Westin and Jonathan Ferro in a Bloomberg TV interview Wednesday.

The Stack formation, along with the nearby Scoop, is going through a drilling boom as it offers good returns at a $50 oil price. Continental expects to more than double output from the area’s oil-soaked rocks this year, while Marathon Oil Corp. plans to double the number of rigs in Oklahoma.

Factoid: About 40% of all seaborne cargo is oil, and there is literally more seaborne cargo at any given time (by weight) than there are fish in the sea.

Apache Raises 2017 Capex By More Than 60%

Apache Corp. (NYSE: APA) estimated its capex in 2017 would be more than 60% higher than 2016, joining a growing list of shale producers that are ramping up spending to take advantage of recovering oil prices.

Apache said Feb. 23 that it plans to spend $3.1 billion in 2017, higher than the $1.9 billion it spent last year. It spent $4.7 billion in 2015.

Apache joins other producers such as ExxonMobil Corp. (NYSE: XOM), Chevron Corp. (NYSE: CVX) and Hess Corp. (NYSE: HES) who have increased their capital budgets for this year.

Apache earmarked nearly two-thirds of its 2017 budget for the Permian Basin in Texas, with $500 million alone budgeted for developing infrastructure in its Alpine High Field.

The company said last September that it had amassed more than 300,000 acres in the field, most of which is in Reeves County, Texas.

Closing Oil and Gas Prices, Thursday, February 23rd.

WTI prices have maintained within the $50-55/Bbl range, however they have been edging closer to the $55/Bbl mark since the IEA and OPEC reports showed 90%+ compliance with quotas. The high compliance levels appear to be largely factored in to current pricing level . Any bullish sentiment is largely founded on hopes that existing cuts will work to quickly normalize inventories. Expectations of further OPEC cuts, or an extension of the cuts beyond the agreed upon six months are still in play.

Natural Gas Outlook

Front-month gas prices have plummeted, down to the $2.61 mark from the mid-$3.90s we saw in late-December and the $3.20-3.45 range that persisted for January, but began to fall in February.

EIA reported a 114 Bcf storage withdrawal for the week of February 10, which was about 12% below expectations and nearly 30% below the five-year average. Overall, we are now at 2,445 Bcf of gas in storage, or about 11% below last year and 4% above the 5-year average.

Now For This Week’s Snippets:

Chesapeake Energy to invest more in crude projects in 2017

Chesapeake Energy, the second-biggest natural gas producer in the US, is planning to scale back its investments in natural gas in favor of crude oil projects as part of its effort to shed debt and improve investment-grade metrics. The company, which has lost $18.5 billion over the past seven quarters, plans to allocate 60% of its 2017 budget into crude projects and drill 320 new crude wells this year, versus 90 natural gas wells.

Energy Dept.: Peak US shale production to be reached in 2026

Production from US shale and tight oil formations will top out in 2026 as oil reserves start depleting and well productivity declines, according to the Energy Department. Production will begin to drop in the Eagle Ford first after 2020 and the Bakken will start declining after 2030, while production in the Permian Basin will remain strong through 2040.

US gas sector continues to have an edge over rest of the world

Production innovation, over a century’s worth of natural gas reserves and cheap liquefaction put the US at the forefront of the global natural gas industry, said Charif Souki, co-founder and chairman of LNG company Tellurian Investments and former CEO of Cheniere Energy. “Three years ago, I thought they had finished improving, but no, they continue to lower the cost of production in the US dramatically by a factor of 15, 20% every year,” Souki said in an interview.

Production efficiency in Utica improved more than in Permian

Utica Shale wells produced 4.2 times more barrels of oil equivalent in January 2017 than January 2014. By comparison, Permian Basin wells produced 3.4 times more barrels of oil equivalent in January compared with three years earlier, while nationwide, production efficiency per well improved threefold.

Apache looking to sell Goodland Lime assets

Apache is exiting the Goodland Lime play in East Texas two years after entering it to focus more on its Permian Basin position. The company is now looking to sell all its Goodland assets, which include 10,723 undrilled net acres in Smith and Van Zandt counties.

Matador forms Permian joint venture with Five Point Capital Partners

Matador Resources and private equity firm Five Point Capital Partners have formed a 51-49 joint venture named San Mateo Midstream, which will operate and expand Matador’s Delaware Basin midstream assets in New Mexico’s Eddy County and Texas’ Loving County. The two companies plan to invest $150 million in the joint venture.

US shale producers could face frac sand shortage

Shale industry experts are concerned that increased drilling activity across US shale plays will lead to a shortage of frac sand later this year as suppliers fail to keep up with demand. Raymond James estimates demand for frac sand would surge to a record 55 million tons this year and top 80 million tons by 2018 as producers drill wider and longer wells that require more frac sand.

US shale production costs to rise for first time in 5 years

Increased drilling activity and pricier oilfield services will drive up break-even prices for US shale producers for the first time since 2012 this year, data from Rystad Energy suggest. The break-even production cost will average $36.50 per barrel in 2017, up $1.60 from last year.

Moriah Henry Partners raises $200M from Post Oak Energy Capital

Midland, Texas-based exploration and production company Moriah Henry Partners has received a $200 million equity commitment from Houston-based Post Oak Energy Capital to help it boost its position in the Permian Basin. The company will use the capital to acquire and develop acreage in the Midland Basin.

Whiting Petroleum plans to boost US shale production in 2017

US shale producer Whiting Petroleum said it will invest over $1 billion in US shale fields this year, particularly in North Dakota’s Bakken Shale and Colorado’s Niobrara Shale. The company expects to produce an average of 140,000 barrels of oil equivalent per day in the fourth quarter of the year, 23% more than in the first quarter.

BHP Billiton considers expanding US shale footprint

Australia’s BHP Billiton is considering adding more rigs in US shale formations, but said it would take its time to avoid repeating mistakes. The company only has one rig in the Permian Basin and doesn’t plan to add more until it better understands and evaluates the region.

US crude inventories declined last week, API says

The American Petroleum Institute reported an 884,000-barrel drop in US crude stockpiles in the week ended Friday, missing analysts’ expectations for a 3.4-million-barrel surge. Gasoline and distillates supplies also plunged by 893,000 barrels and 4.3 million barrels, respectively.

Exxon wipes 3.5 billion barrels from proved reserves

ExxonMobil slashed its proved crude reserves by 19%, the biggest write-off since at least 1999. The de-booking of the 3.5-billion-barrel Kearl oil sands project in western Canada, once valued at $16 billion, accounted for the reduction.

PROMINENT OILMEN

Another story we release every other week in Friday Snippets is a look back at prominent Oklahoma oilmen who have helped create, shape and transform the oil and gas industry in Oklahoma.

This weeks new presentation is on Charles Colcord (1859-1934), a successful cattle rancher, U.S. Marshal, Chief of Police, businessman, and oil man. We have a long list of historical characters we will be presenting but we welcome any suggestions of someone you would like to see featured.

STORIES & LEGENDS SERIES ABOUT OKLAHOMA OILMEN: Charles Colcord

February 17, 2017

NAPE SUMMIT – HOUSTON TEXAS

The NAPE Summit Exhibit Floor opened on Thursday to a crowd of upstream industry leaders that lasted throughout the day. NAPE Week attendance to date has exceeded expectations, with nearly 11,300 attendees and 1,000 new registrants since yesterday.

Attendees buzzed about the exhibit floor, reflecting an optimistic atmosphere and expectation for industry recovery. There are numerous corporate parties and dinners taking place in the space of 48 hours. The restaurants and bars are packed with industry participants catching up and discussing basin activity, pricing and whether the price of oil is headed up or back down.

Retired four-star general and former Secretary of State Colin Powell, the keynote speaker for the NAPE Charities Luncheon, emphasized the exciting ongoing evolution of the global oil and gas industry.

“This is a fascinating time for the industry. It is the time to cut costs and lower risks,” said Powell. “We are experiencing a revolutionary change in the energy industry – shifting toward ways we can go off the grid and decentralize energy.”

Powell explained that while he can sense the anxiety and concerns among the audiences he addresses, he also sees confidence in the American people.

“There is a resiliency in our society,” Powell said. “We are a country that has been separated. We have to bridge the differences in our thinking and [how we] talk to each other, like our founding fathers once did.”

This year’s 700 exhibitors included an array of domestic, international and offshore companies. In addition, two individual domestic and international theaters each ran a full day of prospect previews.

Doors to the NAPE Summit Exhibit Floor open again this morning at 8 a.m.

Factiod: Since June 3, 2016, oil rigs have risen by 266 as of the week ending February 10, 2017—a rise of 87% from the bottom.

Closing Oil and Gas Prices, Thursday, February 16th.

Natural Gas Outlook

Despite a recent blast of winter weather, natural gas prices have quickly been falling. Winter is almost over for the so-called Henry Hub natural gas prices on the NYMEX, since that contract closes on Feb. 24, 2017, and the imminent onset of the refinery buying ahead of the U.S. summer driving season presents additional bullish risks to WTI crude oil prices — and bearish risks to natural gas prices.

Natural gas production volumes in December were 1.6 percent higher than December 2015 and 2016 volumes were 8.4 percent higher than 2015 levels.

Now For This Week’s Snippets:

US shale exports hit record last week

US shale producers exported a record 7 million barrels of oil last week, or 1 million barrels of oil per day, almost double the volume shipped during the previous week. Customers are “looking at other types of crude to fill the gap left by a reduction in OPEC production, and at the same time you’re seeing continuing demand in China, as world oil continues to increase,” said Lipow Oil Associates President Andrew Lipow.

Chesapeake, Ex-CEO’s Estate End Trade Secrets Disagreement

Chesapeake Energy Corp. has reached a deal with the estate of its former CEO to settle a $445-million-plus claim that he stole trade secrets to launch a rival energy company, according to court records.

Noble Energy to nearly double 2017 capital spending

Noble Energy plans to spend between $2.3 billion and $2.6 billion in 2017, up from about $1.3 billion last year, three-quarters of which will be invested in US onshore projects. Noble expects to direct almost half of the onshore budget toward the Denver-Julesburg basin in Colorado, while the Permian’s Delaware Basin should absorb about $500 million.

Drillers shift focus as Permian price bubble continues to inflate

US oil and natural gas companies and investors set their sights on other shale plays such as Oklahoma’s SCOOP and STACK regions, the Bakken formation and the Eagle Ford and Haynesville Shale as land prices in the Permian Basin skyrocket, hitting as much as $60,000 per acre. Williams Capital Group analyst Gabriele Sorbara says out-of-control valuations in the Permian make it nearly impossible for newcomers to get involved.

Diamondback planning to deploy more rigs to Permian Basin this year

Permian-focused Diamondback Energy has set a 2017 budget of up to $1 billion, more than half of which will go toward drilling and completions. Diamondback President and CEO Travis Stice said the company could deploy two more rigs to the Permian’s Delaware and Midland sub-basins by the end of 2017 if oil prices continue to rise.

Applications for new drilling permits spike in Texas

The Texas Railroad Commission issued 956 original drilling permits last month, up from 510 in January 2016, as oil and natural gas companies step up drilling activity to capitalize on higher oil prices even though production has yet to climb. Texas produced 81.5 million barrels of oil in November, a one-million-barrel decline from October.

N.D. posts record decline in oil production

North Dakota oil production fell by over 92,000 daily barrels to 942,455 barrels per day in December, the biggest single-month drop in history, as harsh weather conditions hindered activity. Natural gas output also declined to 1.54 billion cubic feet per day in December, down from 1.76 billion cubic feet per day the previous month.

US shale production in March to gain most barrels since Oct.

US shale drillers are expected to boost production by 79,000 barrels per day to 4.87 million barrels per day in March, the biggest monthly increase in five months, according to the Energy Information Administration. The Permian Basin will drive the gains, with production there predicted to jump by over 70,000 barrels per day to 2.25 million barrels per day.

Williams Partners has agreed to hand over its 50% stake in a natural gas gathering system in the Permian Basin to Western Gas Partners in exchange for interests in two Marcellus Shale gathering systems as well as $155 million in cash. “They want to ‘core down’ to their competency, and their competency is moving gas from the Northeast to end users in the Mid-Atlantic, Southeast and Gulf Coast,” said Tudor Pickering Holt & Co. energy analyst Brandon Blossman.

Occidental Petroleum looks to sell South Texas assets

Occidental Petroleum is reportedly searching for a buyer for its remaining South Texas assets, which comprise 180,000 acres mainly in the Vicksburg Shale, wells and staffed offices worth up to $500 million combined. The asset divestiture follows Occidental’s exit from the Eagle Ford last year and comes as the company increases its focus on the Permian Basin.

No rebound in sight for offshore oil, gas industry

The US offshore oil and natural gas sector continues to be plagued by bankruptcies and declining demand, forcing drillers such as Transocean, Atwood Oceanics and Noble to cut jobs and idle or scrap rigs. Diamond Offshore President and CEO Marc Edwards said he doesn’t expect a rebound earlier than 2019 or 2020 because the industry has yet to “see a floor in the declining demand of deep-water assets.”

Plains All American, Noble form joint venture to buy Permian pipeline system

Plains All American Pipeline and Noble Midstream Partners have entered a 50-50 joint venture agreement to acquire Advantage Pipeline’s assets for $133 million. Advantage Pipeline owns a 70-mile oil pipeline system in the Permian’s Delaware Basin originating in Reeves County and running to Crane County, Texas.

Trump Signs Repeal Of SEC Payment Disclosure Rule

President Donald Trump on Tuesday signed off on legislation that nixed a U.S. Securities and Exchange Commission rule requiring oil and gas extraction companies to disclose their payments to foreign governments, marking the first time in 16 years that a president utilized the Congressional Review Act to overturn a predecessor’s rule.

PROMINENT OILMEN

Another story we release every other week in Friday Snippets is a look back at prominent Oklahoma oilmen who have helped create, shape and transform the oil and gas industry in Oklahoma.

The current video presentation is on J. Paul Getty, one of the most frugal, but wealthiest men to ever live. He drilled his first oil well out near Haskell, OK. We have a long list of historical characters we will be presenting but we welcome any suggestions of someone you would like to see featured.

STORIES & LEGENDS SERIES ABOUT OKLAHOMA OILMEN: J. Paul Getty

February 10, 2017

Welcome to this week’s Friday Snippets!

With the onslaught of an increase in U.S. oil inventories last week – oil continues to rise, which provided some evidence of stronger-than-expected demand.

With inventories close to 80-year record levels at 508 million barrels, the oil markets do not seem deterred. Wall Street is pouring the most money into oil and gas companies in the U.S. since at least 2000, according to Bloomberg.

In January alone, drillers and oilfield service companies raised $6.64 billion in 13 different equity offerings. “The mood is absolutely different,” Trey Stolz, an analyst at the investment banking firm Coker & Palmer Inc., told Bloomberg. “Go back to a year ago and the knife was still falling. But today, it feels much, much better.” The Permian continues to be the hottest onshore play. In 2016, there was $24 billion spent on mergers and acquisitions.

Wood Mackenzie reports that less than two months into the New Year, the industry has already spent half of that amount in the Permian. In Oklahoma, we have two of the country’s hottest plays, central Oklahoma’s SCOOP and STACK portions of the Anadarko Woodford play. In the coming months, several Oklahoma companies are scheduled to announce their 2016 earnings and 2017 CAPEX. Look for more acquisitions as well. We will be down at NAPE next week, where the sentiment is sure to be more optimistic than last year, when rig counts and the price of oil were much lower. Hope to see you there.

Closing Oil and Gas Prices, Thursday, February 9th.

BP plans to invest more in US shale industry

British oil major BP is considering slowly boosting its position in US shale plays, but it will exercise capital discipline because shale assets are expensive, BP CEO Bob Dudley told analysts. Dudley also said the company may pursue several projects in countries such as Trinidad and Tobago, Oman and India.

Shale rebound could push US oil production to 48-year highs in 2018

The Energy Information Administration predicted that US oil output could climb to an average of 9.53 million barrels per day in 2018 — the most since 1970 — up from an anticipated 8.98 million barrels this year. US shale will drive the increase as bullish shale drillers continue to add rigs.

Targa Resources expands Permian footprint

Targa Resources Corp. has executed definitive agreements for a subsidiary to acquire the membership interests of Outrigger Delaware and Outrigger Midland Operating LLC for US565M.

Senate votes to repeal SEC anti-graft rule targeting energy companies

The Senate on Friday voted 52-47 in favor of rescinding a Securities and Exchange Commission anti-corruption rule that would have required US oil, natural gas and mineral companies to divulge payments made to foreign governments. “Passing this CRA will right the ship and put U.S. companies back on a level playing field with their private and foreign competitors; it will also protect them from a dramatic increase in regulatory compliance costs,” said Sen. James Inhofe, R-Okla.

EQT boosts Marcellus Shale position

EQT has acquired 14,000 net acres in the Marcellus Shale in a $130 million deal that will allow the Pittsburgh-based company to drill lateral wells with an average length of 5,700 feet, up from 1,900 feet. The acreage is in West Virginia’s Marion and Monongalia counties.

Record volume of US crude to head for Asia in coming weeks

Oil companies and trading houses including BP, Shell and Mercuria are expected to export between 700,000 and 900,000 barrels of US crude oil per day in February, mostly to Asian countries such as China, Japan and Singapore. “It’s a good time to buy US crude because of the OPEC cut, but our spot room has limitations so we have to compare every cargo,” a Japanese refiner said

Oilfield services costs skyrocket in Permian Basin

The prices asked by oilfield service companies for drilling and hydraulic fracturing in the Permian Basin have surged by as much as 50% in recent months amid increased demand and a shortage of frack crews. Denver-based Lilis Energy says the lowest daily rate for drilling a well is now $16,000, up from $13,900 per day a couple of months ago, while well-fracking costs surged from $2.2 million two months ago to $3.2 million currently.

US oil rig count increased last week, Baker Hughes reports

The number of US oil rigs surged by 17 to 583 in the week ended Friday, the biggest total since October 2015, according to Baker Hughes. The US oil and natural gas rig count is expected to average 795 this year and 911 in 2018. The number of rigs looking for oil and natural gas in the US increased by 4.4% in January compared with January 2016.

US shale production weighs on oil prices

Signs of a continued jump in US shale production depressed oil prices on Monday, despite OPEC’s compliance, with US light sweet crude for March delivery down 1.5% to $53.01 per barrel and Brent crude for April down 1.9% to $55.72. SEB bank analyst Bjarne Schieldrop expects a “strong revival in US shale oil production” and sees US onshore exploration and production spending up by 30% to 40% this year, while the rig count could top 1,000 by 2019.

EIA reports surge in US crude inventories

US crude stockpiles climbed by 13.8 million barrels last week fueled by a 1.1 million-barrel increase at the Cushing, Okla., oil storage hub, the Energy Information Administration said on Wednesday. Gasoline inventories were down 869,000 barrels while distillates surged by 29,000 barrels.

PROMINENT OILMEN

Another story we release every other week in Friday Snippets is a look back at prominent Oklahoma oilmen who have helped create, shape and transform the oil and gas industry in Oklahoma. This weeks new video presentation is on J. Paul Getty, once named him as the world’s richest private citizen. He founded the Getty Oil Company, but despite his wealth, Getty was notably frugal. The Nancy Taylor No. 1 Oil Well Site near Haskell, Oklahoma, was crucial to his early financial success. This oil well was the first to be drilled by J. P. Getty.

We have a long list of historical characters we will be presenting but we welcome any suggestions of someone you would like to see featured.

If you have someone to nominate, reach out to me via email at [email protected] Have a great weekend from Oklahoma Minerals!

STORIES & LEGENDS SERIES ABOUT OKLAHOMA OILMEN: J. Paul Getty

February 3, 2017

Republicans working to repeal Obama’s methane rule

House Republicans are expected to introduce a bill today to overturn former President Barack Obama’s rule targeting methane emissions from venting and flaring at oil and natural gas drilling sites. “These are abusive, last-minute regulations that are grossly inconsistent with congressional intent,” said House Natural Resources Committee Chairman Rob Bishop, R-Utah.

US oil rig count climbed by 15 last week, Baker Hughes reports

The number of US oil rigs increased by 15 to 566 — the highest level since November 2015 — in the week ended Jan. 27, according to Baker Hughes. The total oil and natural gas rig count is expected to climb to an average of 783 this year, 898 in 2018 and 1,009 in 2019.

Border tax could further reduce Mexican oil exports to US

A proposed 20% border tax on Mexican goods will likely encourage Mexico’s oil industry to abandon the American market in favor of Asia and Europe, where demand for Mexican crude is on the rise. The volume of Mexican oil exports to the US is already declining, with 48% of Mexican crude shipped to the US in 2016 compared with 69% in 2014.

US-Mexico dispute unlikely to hinder US shale gas exports

Mexico’s dependence on US shale gas will likely continue to tie the two countries together even if tensions grow. The flow of US shale gas to Mexico more than doubled in the past two years, and ING Groep Chief International Economist Rob Carnell believes Mexico will decide against putting tariffs on US imports in retaliation to President Donald Trump’s proposed 20% border tax because “they would rather have the gas at a decent price.”

Investments keep flowing to the Permian Basin

US shale companies continued their land-buying spree in the Permian Basin into 2017, with about $9 billion in land deals in January. If drillers keep up the current pace, Gesco Sales Manager Josh Clawson estimates that an additional 100 drilling rigs could be deployed to the Permian by June.

Delaware Basin becomes ExxonMobil’s primary focus this year

ExxonMobil announced plans to deploy at least 15 more rigs in the Delaware Basin over time as it seeks to boost production in the region, which has the potential to yield 350,000 barrels of oil equivalent per day at its peak after more than 10 years of sustained drilling. The company, which reported a $2.3 billion loss in the fourth quarter, said it would raise its 2017 budget by 14% to $22 billion.

EnerVest affiliate EV Energy Partners has sold some of its natural gas assets in North Texas’ Barnett Shale for $52 million, with proceeds going toward funding its $59 million acquisition of a 5.8% working interest in 529 net Eagle Ford acres located in Karnes County. “We believe that this position in the Eagle Ford Shale affords many attractive, self-funding, near-term drilling opportunities and will increase our crude production by approximately 25 percent in 2017,” said Michael Mercer, EV Energy president and CEO.

STORIES & LEGENDS SERIES ABOUT OKLAHOMA OILMEN: Robert S. Kerr

January 27, 2017

Lario Oil & Gas spends $345M on Permian acreage

Lario Oil & Gas has expanded its position in the Permian Basin with the $345 million acquisition of 10,000 net acres in the Midland sub-basin, which have a production of about 1,850 barrels of oil equivalent per day. The assets also include “hundreds” of potential drilling locations in the Spraberry and Wolfcamp shales.

US oil rig count surges by 29, Baker Hughes reports

The number of US oil rigs expanded by 29 to 551 in the week ended Jan. 20, the biggest increase since April 2013, according to Baker Hughes. Thirteen rigs were deployed to the Permian Basin, while the Cana-Woodford Shale gained nine rigs.

EP Energy unveils drilling joint venture targeting Wolfcamp

EP Energy and Apollo Global Management-backed Wolfcamp Drillco Operating have formed a 50-50 joint venture with plans to drill 150 wells in two 75-well tranches in the Wolfcamp formation of the Permian Basin. EP Energy put the value of its Wolfcamp assets at about $20,000 per acre.

Midstream companies get caught in Permian Basin frenzy

The recent spike in acquisitions of gathering infrastructure and announcements of pipeline expansions in the Permian Basin suggest that midstream assets in the shale play are becoming as hot of a purchase as Permian Basin land. Most recently, Plains All American Pipeline said it was acquiring the Alpha Crude Connector System in the Permian’s Delaware Basin for $1.2 billion.

Trump administration working on first energy policy changes

President Donald Trump is reportedly preparing to roll back a number of energy regulations enacted by the previous administration as part of his “America First Energy Plan,” published on the White House’s website after his inauguration. Trump plans to repeal Obama’s Climate Action Plan, accelerate permitting for cross-border pipelines, remove the climate change factor when making government decisions and temporarily stop the use of the social cost of carbon as a metric, according to sources.

OPEC members confident US will continue to import their oil

Saudi Arabia and Venezuela are unfazed by President Donald Trump’s pledges to reduce US reliance on OPEC oil and expect their oil export volumes to the US to stay stable. Bloomberg data show the US imported roughly 3 million barrels of oil per day from OPEC in 2016, 60% of which came from Saudi Arabia and Venezuela.

Energy Dept. sells crude from petroleum reserve to Phillips 66

Phillips 66 earlier this month submitted a winning bid to acquire crude from the Strategic Petroleum Reserve, the company announced Monday without disclosing volume or price. The Energy Department has put up for sale 8 million barrels of sweet crude coming from the Big Hill, Bryan Mound and West Hackberry SPR sites as part of its plan to sell $375 million worth of crude from the strategic reserve in fiscal 2017.

Trump clears path for Keystone XL, Dakota Access pipelines

President Donald Trump signed two executive orders on Tuesday to move forward with construction of the Keystone XL and Dakota Access pipelines and invited TransCanada to resubmit an application for a permit for the Keystone project. “Today’s news is a breath of fresh air, and proof that President Trump won’t let radical special-interest groups stand in the way of doing what’s best for American workers,” said Sen. John Cornyn, R-Texas.

Halcon Resources enters Delaware Basin in $705M deal

Halcon Resources has agreed to pay $705 million to acquire a package of Delaware Basin assets that includes 20,748 net acres in Texas’ Pecos and Reeves counties with a production capacity of 2,600 barrels of oil equivalent per day. The company also said it was selling its El Halcon assets in the Eagle Ford Shale in East Texas for $500 million, which it will use to fund the Delaware Basin acquisition.

API: US crude inventories up 2.9 million barrels

US crude stockpiles rose by 2.9 million barrels in the week ended Jan. 20, surpassing analysts’ forecast of a 1.9 million-barrel build, the American Petroleum Institute reported on Tuesday. Gasoline and distillates inventories also climbed by 4.9 million barrels and 2 million barrels, respectively.

Barclays: Oil production will only increase in the Permian in 2017

The Permian Basin will be the only US shale play where oil production will surge in 2017, according to Barclays commodity analysts. They expect output in the Permian to increase by 490,000 barrels per day from the fourth quarter of 2016 to the final quarter of 2017

STORIES & LEGENDS SERIES ABOUT OKLAHOMA OILMEN: Robert S. Kerr

January 20, 2017

EIA forecasts higher US shale oil production in Feb.

The Energy Information Administration expects US shale oil production to climb in February for the first time in three months, surging by 40,750 barrels per day to reach 4.748 million barrels per day. The Permian Basin will drive the growth, with production in the region estimated to increase by 53,000 barrels per day to reach 2.180 million barrels per day.

API: US crude inventories decline more than expected

US crude stockpiles shrunk by 5 million barrels in the week ended Jan. 13, exceeding analysts’ forecast for a 900,000-barrel drop, according to the American Petroleum Institute. Gasoline and distillates inventories rose by 9.8 million barrels and 1.2 million barrels, respectively.

Oil executives sound alarm over US shale

Oil industry executives and officials at the World Economic Forum in Davos, Switzerland, are concerned that the growing US shale industry will cause oil prices to fall again. “Physical delivery of oil will force the price back down again in the second half of this year,” said Bjarne Schieldrop, chief commodities analyst at Swedish bank SEB.

Jagged Peak seeks to raise up to $791M in IPO

Denver-based Jagged Peak Energy has launched an initial public offering — this year’s first in the upstream sector — with an eye to raising up to $791 million of gross proceeds, or $421 million of net proceeds. The company operates more than 68,000 acres in the Permian’s Delaware Basin, with a daily output of 6,600 barrels of oil.

ConocoPhillips makes big oil discovery in Alaska

ConocoPhillips has announced the discovery of as much as 300 million barrels of oil in the northeast part of the National Petroleum Reserve in Alaska, which could become a multibillion-dollar project generating up to 100,000 barrels of oil per day once it’s operational. Production could begin in 2023.

US drillers show renewed interest in the Eagle Ford

A recent surge in dealmaking and drilling activity in the Eagle Ford Shale suggests the South Texas shale play may be poised for a comeback in 2017. Two of the most recent Eagle Ford acreage deals sold land at about $15,000 per acre, up from last year’s average of $3,500, while the number of active drilling rigs has climbed by 18 since reaching a low of 29 in June 2016.

ExxonMobil expands Permian Basin footprint with $5.6B acquisition

ExxonMobil has agreed to pay $5.6 billion in stock to the Bass family in Fort Worth, Texas, to purchase a number of companies that control about 275,000 acres, mostly in the Permian Basin. The purchase doubles ExxonMobil’s Permian holdings to about 6 billion barrels of oil equivalent.

Noble Energy to acquire Clayton Williams in $2.7B deal

Noble Energy has agreed to buy Clayton Williams Energy in a $2.7 billion deal that will expand its position in the Permian Basin to 120,000 acres and 4,200 drilling locations. “This makes us a leading player in the core of the core of the Delaware Basin,” said Noble Energy President and CEO David Stover.

SM Energy to divest remaining Williston Basin assets

SM Energy is searching for a buyer for its remaining acreage in Divide County, N.D., as it seeks to exit the Williston Basin to focus on the Permian Basin. “Over the next five years, we intend to focus on generating significant high margin production growth from our operated acreage positions in the Midland Basin and Eagle Ford,” said SM Energy President and CEO Jay Ottoson.

STORIES & LEGENDS SERIES ABOUT OKLAHOMA OILMEN: William Skelly

January 13, 2017

US shale set to share in $51B cash injection

A capital allocation of $51 billion aimed at the US and Canadian energy sector from the 70 natural resource funds that were launched globally last year may bring particular benefits to US shale oil producers. Industry analyst Dave Forest believes the boost could even lead to what he calls a “second wave” of shale development.

Shale-rich Okla. sees financial pressure easing

Pressure on shale revenues for the state of Oklahoma remain a concern but are showing signs of easing, says State Treasurer Ken Miller. Oklahoma was adversely affected by last year’s oil price downturn, but its rally to prices in the mid-$50-per-barrel range led to a 15.6% jump in oil and natural gas tax revenues in December.

Consultants predict doubling of oil projects in 2017

Analysts at Wood Mackenzie say they are “cautiously optimistic” that oil and natural gas companies will raise their spending this year on the back of increased crude oil prices, resulting in new product developments that could be double last year’s number. This would mark an end to the past two years of relative inactivity, although the rise in spending is still likely to be 40% below the 2014 figure.

Oil companies may boost E&P spending after 2 years of declines

Oil and natural gas companies are expected to return to spending on exploration and production, raising their investment by an estimated 7% after several years of relative frugality. The upturn comes on the back of a 21% oil price rally since November.

US announces sale of 8M barrels from oil reserves

The Energy Department has invited bids for 8 million barrels of light, sweet oil that it seeks to offload in the coming weeks. The sale is part of its plan to sell as much as $375.4 million of crude in fiscal 2017 in order to finance infrastructure revisions to its emergency reserves of around 695 million barrels.

C&J Energy ends bankruptcy with liquidity worth $220M

C&J Energy Services has emerged from Chapter 11 bankruptcy protection with $1.4 billion in debt eliminated and liquid funds of $220 million. The turnaround comes less than a year since the untimely death of then-CEO Josh Comstock and the company’s subsequent bankruptcy filing, and President and CEO Don Gawick called the achievement “an outstanding resolution.”

Drillers back to work after nearly half-million job loss

For the first time in three years, the US oil industry is set to increase spending, paving the way for thousands of oilfield workers to be rehired, as well as for equipment suppliers and contractors to increase productivity. The upturn is a result of rising oil prices following the earlier slump.

Noble to drill 7,200 new acres in Delaware Basin

Noble Energy has spent $300 million to buy drilling rights on a further 7,200 acres in the Delaware Basin, bringing its total Delaware coverage up to 47,200 net acres. The company has also brought a third oil rig to the site, and Executive Vice President of Operations Gary Willingham said Noble is “aggressively moving forward with development.”

Samson Files Amended Ch. 11 Plan After Deal With Creditors

Samson Resources Corp. and its creditors aired full details Wednesday of a proposed global settlement in the oil and gas producer’s long-running, $4 billion Chapter 11 restructuring battle, setting the stage for a Delaware court hearing.

WPX Increases Position In Delaware Basin

WPX Energy Inc., is increasing its Permian operations to more than 120,000 net acres with a bolt-on acquisition, the Tulsa, Okla.-based company said Jan. 12. The sellers are Panther Energy Co. II LLC and Carrier Energy Partners LLC. For $775 million cash, WPX agreed to acquire 18,100 net Delaware Basin acres with about 6,500 barrels of oil equivalent per day (boe/d) of production, of which 55% is oil.

The acreage is located in Reeves, Loving, Ward and Winkler counties in West Texas and includes 920 gross undeveloped locations in the geologic sweet spot of the Delaware. The company is also acquiring 23 producing wells (17 horizontals) and two drilled but uncompleted horizontal laterals.

STORIES & LEGENDS SERIES ABOUT OKLAHOMA OILMEN: William Skelly

January 6, 2017

American oil companies’ stock offerings pay off

Most of the North American oil companies that were bold enough to sell shares during the past two years got rewarded for their courage and were among the top performers of 2016 as oil prices rebounded. More than 70 oil companies sold stock amounting to about $57 billion combined in the last two years, and while some companies went bankrupt, the majority survived the oil price crash and emerged stronger and less indebted thanks to the stock offerings.

US crude stockpiles decline more than expected

US crude oil stocks fell by 7.4 million barrels in the week ended Dec. 30, far outstripping analysts’ predictions of between 1.7 million and 2.2 million barrels, the American Petroleum Institute reported. Meanwhile, gasoline and distillates inventories surged by 4.25 million barrels and 5.24 million barrels, respectively.

Trans-Alaska Pipeline sees oil volume surge for first time since 2002

The volume of oil moved through the Trans-Alaska Pipeline System increased nearly 2% to 188,887,500 barrels in 2016 — the first year-on-year rise in 14 years, according to operator Alyeska Pipeline Service. The increase can be attributed to a surge in North Slope oil production.

SM Energy divesting $800M worth of assets in the Eagle Ford

SM Energy has agreed to sell a package of assets in the Eagle Ford Shale that includes about 37,500 net acres and related pipeline infrastructure to Venado Oil and Gas for $800 million. The divestment comes as SM Energy shifts its focus to the Permian Basin, where it bought 35,700 net acres for about $1.6 billion in October.

Lucas Energy gets a foothold in the Permian Basin

Houston-based Lucas Energy has acquired 3,630 net acres in the Permian Basin’s San Andres formation as part of an area of mutual interest partnership with a privately held holding company, and it will pay $1.43 million for a 90% interest in the leases. “With this initial leasehold position, we have established our entry into the prolific Permian Basin,” said Lucas Energy President and CEO Anthony Schnur.

DCP Midstream Partners acquires joint venture

DCP Midstream Partners has acquired the assets of a joint venture between Phillips 66 and Spectra Energy to form an $11 billion company, named DCP Midstream, that will be the largest natural gas liquids producer and gas processor in the country. Under the agreement, DCP Midstream is paying DCP Midstream Partners $424 million in cash in exchange for about 31.1 million shares.

2 N.M. counties lead other Permian Basin counties in oil, gas production

New Mexico’s Lea County is the top oil-producing county in the Permian Basin, while Eddy County leads in terms of natural gas production, according to Texas and New Mexico state agencies. Oil production in Lea County exceeded 70.9 million barrels in 2015, while Eddy County produced 311.9 million thousand cubic feet of natural gas.

No boom in sight in the Eagle Ford despite spike in drilling activity

An oil boom in the Eagle Ford Shale is unlikely because it would take a “tremendous and unexpected increase in global demand to get up to over $100 a barrel,” said economist Karr Ingham. However, drilling activity in the Eagle Ford is on the rise, with ConocoPhillips, Pioneer Natural Resources and BHP Billiton among the companies planning to add rigs this year.

PDC Energy boosts its Permian footprint

PDC Energy is expanding its Delaware Basin position with the $118 million acquisition of an asset package that includes 4,500 net acres in Ward County, Texas, one drilled but uncompleted horizontal well and a wastewater disposal well. “Our net acreage, drilling inventory and estimated reserve potential in the basin are expected to increase by approximately 10% with this transaction,” said PDC CEO Bart Brookman.

JPMorgan predicts increased US shale production in later 2017

JPMorgan’s head of regional oil and gas for Asia Pacific Scott Darling predicts an increase in oil production from US shale companies in the second half of 2017, which will likely offset some of the oil price gains triggered by OPEC’s production-cut deal. US shale could add 200,000 barrels per day with prices at $50, up to as much as 1 million barrels per day if prices rise above $60, Darling says.

STORIES & LEGENDS SERIES ABOUT OKLAHOMA OILMEN: Everette Lee DeGolyer

December 30, 2016

API reports surge in US crude oil inventories

US crude stockpiles increased by 4.2 million barrels last week, according to the American Petroleum Institute, whereas analysts had expected a 1.5 million barrel decline. Gasoline inventories dropped by 2.8 million barrels while distillate stocks were down 1.7 million barrels.

What will Trump’s impact be for oil, gas production?

The oil and natural gas industry sees President-elect Donald Trump as a good thing for production, pointing to his promises to approve infrastructure projects and expand operations on federal lands. Some analysts say the actions of the incoming administration won’t have as much effect on the industry as market conditions.

A wave of IPOs could hit US oil industry through 2018

As many as 40 North American oil and natural gas companies could go public over the next two years, up from 13 this year, because of higher crude prices and the potential for deregulation, according to Tudor Pickering Holt & Co. CEO Maynard Holt. “The number of companies expressing interest in going into this window is really high, and the number of investors saying we’d like to see something different is really high,” Holt said.

Macquarie: US shale output could surge by 1 million barrels per day

The gains in oil prices from OPEC’s production cut plan would likely be erased by an increase in US shale production by 1 million barrels per day, Macquarie analysts say. Potential cheating by OPEC members, higher output in Libya and Nigeria and an anticipated slowdown in oil demand growth amplify the threat to the recovery in oil prices.

Baker Hughes: US oil rig count surges for 8th week in a row

The number of US rigs drilling for oil rose by 13 to 523 in the week ended Dec. 23, marking the eighth consecutive week of gains, according to Baker Hughes. The Permian Basin added four oil rigs for a total of 262 rigs

US sale of sweet crude from emergency oil reserve to kick off in Jan.

The Energy Department plans to start selling off about 8 million barrels of sweet crude from the Strategic Petroleum Reserve in early to mid-January, with delivery anticipated in March, a department notice to potential bidders revealed. The $375 million sale is the first of several slated to be held over the next few years, with total value estimated at $2 billion.

3 US oil companies to file for bankruptcy

Memorial Production Partners, Forbes Energy Services and Bonanza Creek Energy plan to file for Chapter 11 bankruptcy protection over the next few weeks, joining the more than 200 North American oil and natural gas companies that filed for bankruptcy. However, bankruptcies in the oil and gas industry are expected to decline in 2017 as crude prices rise.

Golden Pass LNG project gets the green light

The Federal Energy Regulatory Commission granted a permit to Golden Pass Products to build a $10 billion liquefied natural gas facility in Sabine Pass, Texas, with a total capacity of 17.2 million tons of LNG per year. The project is expected to create about 3,800 jobs in 25 years of operations.

Iraq commits to OPEC cuts, sends oil prices higher

Iraqi Oil Minister Jabar al-Luaibi told the official Kuwait News Agency his country was committed to cutting as much as 210,000 barrels per day from production starting next month. Iraq, he said, is keen on maintaining balance in the global market and has an eye on oil priced at $60 per barrel.

STORIES & LEGENDS SERIES ABOUT OKLAHOMA OILMEN: Everette Lee DeGolyer

December 23, 2016

Chesapeake Energy hopes supersize wells will help it make a comeback

Chesapeake Energy has drilled a supersize oil and natural gas well to a depth and horizontal length of two miles in the Haynesville Shale as part of an experiment which, if successful, could help the company produce more fossil fuels for a cost 75% lower than average and stage a financial recovery. “What we’re learning in the Haynesville, we’re testing in the Eagle Ford, we’re going to apply to the Utica,” said Frank Patterson, the company’s executive vice president of exploration and production.

Operators extend Glass Mountain Pipeline to enter Okla.’s STACK play

SemGroup and NGL Energy Partners have announced plans to build a 44-mile extension of the Glass Mountain Pipeline so it can transport crude oil from the STACK play to Cushing, Okla. The project is expected to be completed in the fourth quarter of 2017.

US energy companies need oil prices at $55 per barrel for turnaround

US independent oil and natural gas companies that survived the oil price crash will be the first oil industry players to make a comeback in 2017 if oil prices stabilize above $55 per barrel, according to energy research firm Wood Mackenzie. Average oil prices above $50 per barrel will allow US independents to boost investments by 25% and in some cases, increase production by an average of 2% in 2017.

Drilling in the Permian is becoming too expensive for some oil companies

Increased competition could make it unsustainable for some oil companies to continue to drill in the Permian Basin at the current rate because it could prompt workers to ask for higher wages and lift oilfield service costs, which in turn would hurt drillers’ already weak profits, analysts say. “We think it’s going to become a big-company game,” said Instinet analyst Lloyd Byrne.

US oilfield services firm Forbes Energy Services is reportedly planning to file for bankruptcy protection as soon as this month in an effort to reduce its $300 million debt load. The company posted third-quarter losses of $23.2 million and warned last month in its quarterly financial statement that it could have to file for bankruptcy.

Anadarko Petroleum to divest $1.2B in Marcellus Shale assets

Anadarko Petroleum has agreed to sell 195,000 acres along with associated equipment in Pennsylvania’s Marcellus Shale to a subsidiary of Alta Resources Development for $1.2 billion. The deal, expected to close in early 2017, marks Anadarko’s exit from the Marcellus as the company is shifting its focus to Colorado’s Denver-Julesburg Basin and Texas’ Delaware Basin.

December 16, 2016

Gulfport to buy acreage in Oklahoma’s SCOOP for $1.85 billion

Gulfport Energy Corp (GPOR.O) said it would buy acreage in Oklahoma’s SCOOP region from a privately held company for $1.85 billion. The deal is expected to close in February 2017.

The purchase price consists of $1.35 billion in cash and about 18.8 million of Gulfport’s shares. Oil companies have resumed buying oil and gas acreage in low-cost shale fields in the United States, restocking their inventories on a bet that a two-year slump in the price of oil has abated. Gulfport said it would buy 46,400 acres from Vitruvian II Woodford LLC, a portfolio company of Quantum Energy Partners, a Texas-based private equity and venture capital firm.

The leases include access to the Woodford and Springer rock formations under parts of Grady, Stephens and Garvin counties. The deal also includes 48 producing horizontal wells and an interest in more than 150 non-operated horizontal wells. Existing production was about 183 million cubic feet of natural gas equivalent per day in October. The properties are 80 percent held by production.

Four rigs are currently operating on the acreage and Gulfport plans to add two more rigs in 2017. Gulfport has identified about 1,750 drilling locations in the area, the company said.

BP moves headquarters of Lower 48 onshore business to Denver

BP on Wednesday announced it would move the headquarters of its Lower 48 onshore division from Houston to Denver in the first quarter of 2018 and have at least 200 employees there as a result. “With two-thirds of our operated oil and natural gas production and proved reserves in the Rockies … Denver is a logical — and strategic — place for us to be and a natural fit for our business,” said David Lawler, CEO of BP’s Lower 48 business.

Diamondback Energy has agreed to acquire 76,319 net acres in Texas’ Pecos and Reeves counties from Brigham Resources Operating and Brigham Resources Midstream in a cash-and-stock deal worth $2.43 billion. The acreage produced an average of about 9,500 barrels of oil equivalent per day in November.

Panhandle Oil and Gas reports FQ4 results

Michael C. Coffman, President and CEO, said, “As have all companies in the oil and gas industry, Panhandle experienced a very difficult year in 2016, brought on by extremely low product prices. Our average per Mcfe sales price of $2.73 in 2016 compared to $3.97 in 2015 and $5.88 in 2014.

For fiscal 2016, the Company recorded a net loss of $10,286,884. This compared to a net income of $9,321,341 for fiscal 2015. Total revenues for 2016 were $39,063,183, a decrease from $70,882,093 for 2015. Oil, NGL and natural gas sales revenues decreased $23,122,561 or 42% in 2016, as compared to 2015.

Swift Energy completes sale of remaining 25% interest in La. fields

Swift Energy has sold its remaining 25% interest in Louisiana’s Burr Ferry and South Bearhead Creek fields for $8 million, with proceeds going toward reducing debt. “These transactions to date have simplified our business model, as our cost structure is now more representative of our Eagle Ford development program,” Swift Energy CEO Bob Banks said.

Kinder Morgan reportedly plans to divest Permian Basin assets

Kinder Morgan is looking to sell its oil and natural gas assets in the Permian Basin, which produce about 56,000 barrels of oil per day, sources say. Proceeds from the sale could amount to more than $10 billion and will likely be used to clear some of the company’s debt, according to analysts.

Congress authorizes sale of $375M worth of emergency reserve US crude

The US government will sell $375 million worth of crude oil from the Strategic Petroleum Reserve this winter as part of an up to $2 billion overhaul designed to “increase the integrity and extend the life” of the 695 million-barrel oil reserve. Additional annual sales will have to be approved over the next three fiscal years to hit the overhaul target.

US shale recovery to offset oil price gains, Goldman Sachs says

Goldman Sachs analysts predicted that crude prices above $60 a barrel will trigger a rebound in US shale production next year, which in turn will cause prices to fall back to $55 a barrel. The bank’s analysts also said they disagree with Saudi Arabia Energy Minister Khalid al-Falih’s recent comments that the American shale industry will not increase output significantly in response to higher prices.

Trump names ExxonMobil CEO Tillerson secretary of state

President-elect Donald Trump brought an end to his wide-ranging search for a secretary of state by appointing ExxonMobil CEO Rex Tillerson. Trump brushed aside concerns expressed by leaders of both parties that the energy executive’s relationship to Russian President Vladimir Putin was too close to permit him to represent the global interests of the US.

Darren Woods to succeed Rex Tillerson as ExxonMobil CEO

Darren Woods, the former head of ExxonMobil’s refining and supply arm, is set to replace Rex Tillerson as CEO of the company following the latter’s retirement and nomination for secretary of state. Woods has been with the company since 1992 and has served as president and member of the board since January of this year.

Extraction Oil & Gas pays $177M for D-J Basin acreage

Denver-based Extraction Oil & Gas is in the process of acquiring about 16,800 net acres in the Denver-Julesburg Basin for $177 million and will sell about 25 million shares for net proceeds of $442 million to fund the deal. The majority of the acreage is expected to achieve breakeven prices below $45 a barrel.

Patterson-UTI to merge with Seventy Seven Energy in $1.76B deal

US drilling companies Patterson-UTI and Seventy Seven Energy will merge in a $1.76 billion all-stock deal, creating a combined company that would have 201 high-specification rigs and 1.5 million hydraulic fracturing horsepower. The transaction is expected to close in the first quarter of 2017.

Callon Petroleum plans to pay $615 million to purchase assets in the Southern Delaware Basin from American Resource Development, American Resource Development Upstream and American Resource Development Midstream. The acreage had a net production of 1,945 barrels of oil equivalent per day in October.

EIA: US shale production to rise for the first time in 5 months in Jan.

The Energy Information Administration expects US shale production to surge by 1,400 barrels per day to 4.542 million barrels per day in January, marking the first month-on-month increase since July. The Permian Basin will lead the gains, with production expected to jump by 37,000 barrels per day to 2.13 million barrels per day.

STORIES & LEGENDS SERIES ABOUT OKLAHOMA OILMEN: FRANK BUTTRAM

December 9, 2016

EIA: US crude inventories fall

US crude stockpiles plunged by 2.4 million barrels in the week ending Dec. 2, compared with analysts’ expectations for a draw of 1.7 million barrels, according to the Energy Information Administration. Gasoline inventories rose by 3.4 million barrels, while distillate supplies increased by 2.5 million barrels.

Bankruptcies in oilfield services sector growing

Troubled US oilfield services companies are increasingly filing for Chapter 11 bankruptcy protection as they seek to clear debt and raise funds for investments in preparation for the upturn expected during President-elect Donald Trump’s presidency. About 70 oilfield services companies filed for bankruptcy this year through October, compared with 39 in all of last year.

SM Energy to sell shares to fund Midland acreage acquisition

SM Energy seeks to raise $363.4 million from the sale of 9.5 million common shares, with plans to use part of the proceeds to acquire 4,100 acres in the Midland Basin of the Permian for $120 million. “The bolt-on nature of the acreage acquired will stretch laterals and improve well economics,” Capital One Southcoast analysts said.

Noble Energy expands Delaware Basin position

Noble Energy has paid $216 million for 7,200 acres in the Delaware Basin portion of the Permian and has also increased working interests in certain assets it already operates there. As a result of the deal, the company will boost its Delaware position with 150 new locations.

Dakota Access denial casts shadow over new projects

The US Army Corps of Engineers’ decision to deny an easement needed for the Dakota Access Pipeline could spell uncertainty for future pipeline projects, considering that Energy Transfer Partners had received all necessary permitting approvals. “I think it sends a horrible signal to anyone wanting to invest in a project, and I strongly suspect those policies will be discontinued on Jan. 20th,” said former Pipeline and Hazardous Materials Safety Administration head Brigham McCown.

Asia receives nearly 3 million barrels of US crude from BP

BP has exported almost 3 million barrels of US crude oil to Asia over the past few months as part of a $150 million operation that involved seven tankers and several transfers. More long-haul shipments of US crude such as BP’s are expected in 2017 in the wake of Russia and OPEC’s oil production cuts.

Fraser Institute names Okla. best place for oil and gas investment

Oklahoma, Texas, Kansas, Saskatchewan and Wyoming are the top five most attractive jurisdictions for oil and natural gas investment worldwide thanks to their friendly policies, according to the Fraser Institute’s annual Global Petroleum Survey. “Most US states are bucking the global trend of decreasing confidence for investment, and Oklahoma’s top spot in this year’s ranking demonstrates how coherent environmental policy and sound regulation can improve investor perception,” said Fraser Institute Senior Director of Natural Resource Studies Kenneth Green.

Chesapeake Sells First Of Two Haynesville Packages For $450 Million

Chesapeake Energy Corp. (NYSE: CHK) is delivering on its divestment plans, saying Dec. 5 it agreed to sell a package of producing Haynesville Shale acreage in northern Louisiana for about $450 million. The deal covers 78,000 net acres, with slightly more than half—40,000 net acres—considered core to Oklahoma City-based Chesapeake. Assets include 250 wells producing 30 million cubic feet of gas per day (MMcf/d).

STORIES & LEGENDS SERIES ABOUT OKLAHOMA OILMEN: HARRY SINCLAIR

December 2, 2016

Mary Fallin a Candidate as Secretary of Interior

Oklahoma Gov. Mary Fallin as secretary of the interior would be great news — at least for the state’s oil and gas industry. The Department of Interior, along with the Environmental Protection Agency and, to a lesser extent, the Department of Energy, are important federal agencies for oil and gas producers. Interior oversees the Bureau of Land Management, which is responsible for 245 million surface and 700 million subsurface acres owned by the federal government. Also in the secretary of the interior’s portfolio are the Bureau of Indian Affairs and the Office of the Special Trustee for American Indians, both of which have connections to energy production and the State of Oklahoma.

OPEC Deal Sends Energy Stocks Through The Roof

US energy stocks surged on Wednesday on news of the OPEC production cut agreement, with 16 out of the 36 energy stocks in the S&P 500 posting gains of at least 10%. The top three gainers were Marathon Oil, Transocean and Newfield Exploration, up 21%, 17% and 16%, respectively.

US Becomes A Net Exporter Of Natural Gas

The US has exported 7.4 billion cubic feet a day of natural gas on average this month, compared with an average of 7 billion cubic feet a day in imports, figures from S&P Global Platts show. It’s the first time in almost 60 years that the US has shipped more gas than it has bought.

Low Oil Production Costs In US Shale Plays Threaten OPEC

The ability of US shale drillers to produce oil at costs as low as $15 a barrel threatens to offset any rise in crude prices that an OPEC production cut deal could bring because it would stimulate US shale producers to boost output. Break-even price points in the Bakken Shale have dropped to $29.44 in 2016 from $59.03 in 2014, and the downward trend is expected to persist.

Concho Resources Strengthens Permian Basin Position with $430M Deal

Concho Resources is expanding its Permian Basin acreage with the acquisition of land in the Delaware Basin, part of a $430 million deal that would provide opportunities for denser development for multi-well pads. Concho aims to increase its rig count in the Delaware Basin, a section of the Permian, in 2017 and is targeting 20% production growth.

Baker Hughes has divested its cementing and hydraulic fracturing business, which will become part of a new joint venture in partnership with CSL Capital Management and a Goldman Sachs merchant banking division. Baker Hughes will own a 46.7% stake in the venture, called BJ Services, and will receive $150 million in compensation as part of the deal.

Texas Crude Oil Production Stable

Crude oil production in Texas averaged 2.38 million barrels per day in September, 1.6% lower than in September 2015, the Texas Railroad Commission reported. Texas, the top oil producer in the US, produced 995 million barrels of crude over the past 12 months.

US Crude Inventories Fall by 900,000 Barrels, EIA Reports

The U.S. Energy Information Administration reported Wednesday that crude inventories decreased by 900,000 barrels for the week ended Nov. 25, putting inventories at 488.1 million barrels. “At 488.1 million barrels, U.S. crude oil inventories are near the upper limit of the average range for this time of year,” the EIA said in a statement. However, Cushing, Okla., posted a record increase of 2.3 million barrels, the biggest since March 2015. Cushing is still near maximum operating capacity.

STORIES & LEGENDS SERIES ABOUT OKLAHOMA OILMEN: HARRY SINCLAIR

November 25, 2016

Results of The Short Rig Count Week

The overall US drilling rig count increased by 5 to 593 during a week ended Nov. 23 that was shortened by the Thanksgiving Day holiday. The latest jump comes after last week’s increase of 20 rigs, the largest since April 2014. Oil-directed rigs gained 3 units this week to 474, an increase of 158 since May 27. Gas-directed rigs rose 2 units to 118, up 35 since Aug. 26. The horizontal count is now up 161 since May 27.

Pawnee Nation Sues US Government in Bid to Cancel Okla. Drilling Permits

The Pawnee Nation of Oklahoma has sued the federal government claiming that the Interior Department, the Bureau of Indian Affairs and the Bureau of Land Management approved drilling permits and leases on tribal lands despite a tribal moratorium on new oil and natural gas wells. The Pawnee Nation, with its tribal headquarters located in Pawnee, has approximately 3,200 members.

Trump Vows to Lift Fossil Fuel Restrictions on First Day in Office

President-elect Donald Trump pledged to eliminate regulations that limit fossil fuel production on his first day in the White House. “On energy, I will cancel job-killing restrictions on the production of American energy — including shale energy and clean coal — creating many millions of high-paying jobs,” Trump said in a video message.

US Rig Use Down This Year, But More Activity Expected in 2017

The use of rigs dropped around the world this year following two years of decline in drilling activity, according to an annual rig census by National Oilwell Varco. The US fleet saw a decrease of 188 rigs, and the number of active global offshore mobile units declined by 29%, but an increase in new wells and rigs is expected next year.

Swift Energy Divests Southeast La. Assets

Swift Energy has sold its 14,000-acre assets in the Lake Washington field in Southeast Louisiana for about $40 million as the company shifts its focus to the Eagle Ford Shale in South Texas. “We’ve had a tremendous amount of success with the development of our assets in South Texas, and this transaction allows us to focus exclusively on our very best rate of return projects,” said Swift Chief Operating Officer, Executive Vice President and interim CEO Bob Banks.

Some US Oil & Gas Companies That Survived Bankruptcy Face Risk of Relapse

US oil and natural gas companies that emerged from Chapter 11 bankruptcy protection with still too much debt or too little cash on hand are vulnerable to “Chapter 22,” a term for firms that failed to solve their problems with a Chapter 11 restructuring. Such is the case of oil and gas industry data provider Global Geophysical Services and offshore driller Hercules Offshore, while other companies such as Vantage Drilling International, ETX Energy and Titan Energy are at risk of a subsequent bankruptcy.

Stories & Legends Series About Oklahoma Oilmen: Frank Phillips

November 18, 2016

Oklahoma’s earthquake problem, Is There a Solution?

Earthquakes in Oklahoma, such as the magnitude 5.0 temblor that damaged buildings Sunday in Cushing, are related to the underground disposal of wastewater in oil and gas production, and they likely will continue for several years, experts say. Even once injections into the Arbuckle formation under Oklahoma stop, earthquakes will continue because of the time it takes for pressure to spread out from concentrated areas, said Jeremy Boak, director of the Oklahoma Geological Survey.

Entrepreneurs are working on ways to deal with Oklahoma’s earthquake problem, which is believed to be caused by the pumping of salty wastewater back into the ground during the hydraulic fracturing process. Among the ideas are to extract salt from the water and release the water into rivers, turn the salt slurry into disposable brine, and use the water for other parts of the drilling operation.

Wolfcamp Shale Could Contain 20 Billion Untapped Oil Barrels

USGS says the Wolfcamp Shale in West Texas is believed to hold 20 billion undiscovered, recoverable barrels of oil, more than any other oil deposit in the US, the US Geological Survey said in a study released Tuesday. The Wolfcamp could also contain 16 trillion cubic feet of associated natural gas and 1.6 billion barrels of natural gas liquids.

Although the Permian has been gushing crude since the 1920s, its multiple layers of oil-soaked shale remained largely untapped until the last several years, when intensive drilling and fracturing techniques perfected in other U.S. regions were adopted. The Wolfcamp, which is as much as a mile thick in some places, has been one of the primary targets.

US crude oil stockpiles grew by 3.6 million barrels in the week ended Nov. 11, more than twice as much as analysts had predicted, according to the American Petroleum Institute. On the flip side, US shale oil production in December is expected to decline by 20,000 barrels a day, less than in November, for a total of 4.498 million barrels a day, according to a report by the Energy Information Administration.

Output in the Permian Basin is forecast to climb by 27,000 barrels a day, while production at Texas’ Eagle Ford and North Dakota’s Bakken Shale plays will likely fall by 33,000 barrels a day and 14,000 barrels a day, respectively. It will be interesting to see if Donald Trump’s threat to ‘become independent of any need to import energy from the OPEC cartel‘ materializes and whether the President-elect will follow through on his threats to ban Saudi crude imports to the U.S.

Oil Drillers Increasingly Focus on The Permian Basin

With a count of about 220 active oil rigs, the Permian Basin has almost the same number as the rest of the US combined, the Energy Department said in a report. The Permian is also the only US region expected to have an increase in production for a third month in a row.

Double Eagle Receives Up To $450 Million For Midland Deals

Double Eagle Energy Permian LLC formed a strategic relationship to grow and develop its position in the Midland Basin, the company said Nov. 14. As part of a definitive agreement, Magnetar Capital agreed to invest up to $450 million of equity and delayed draw unsecured debt capital to support Double Eagle’s Midland development and A&D activities.

Double Eagle has rapidly grown to become one of the largest pure-play Midland Basin E&Ps following the recent merger of two private equity-backed companies, the release said. In October, Double Eagle Lone Star LLC and Veritas Energy Partners Holdings LLC, both based in Fort Worth, Texas, agreed to combine forming Double Eagle Energy Permian. Combined, the companies control more than 60,000 core Midland net acres (over 70% operated) located predominantly in Midland, Martin, Howard and Glasscock counties in West Texas.

Beckham County Well Completion

In far Western portion of the Anadarko Basin, Atalaya Resources LLC completed a Des Moines Granite Wash D well in Section 32-11n-21w of Beckham County, Okla. The #1H Barnett 29/28-11-21 was tested in an acidized and fracture-stimulated horizontal interval at 13,335-17,995 ft. It initially flowed 2.48 MMcf of gas, 566 bbl of 53-degree-gravity condensate and 158 bbl of water per day. The discovery was drilled northward to 18,080 ft and it bottomed in Section 29-11n-21w with at true vertical depth of 13,010 ft. Tested on an 8/64-in. choke, the shut-in tubing pressure was 6,375 psi and the flowing tubing pressure was 6,200 psi. According to the Tulsa-based operator, the estimated ultimate recovery is 5.0 Bcf of gas and 350 Mbbl of condensate

Franco-Nevada Corp. Acquires Stack Interest

Franco-Nevada Corp. has entered into an agreement to acquire royalty interest in STACK assets in Oklahoma for $100 million. The transaction includes ~1.61% royalty interest over 74,880 gross acres in Blaine Co., and Kingfisher Co., OK. The seller is rumored to be Felix Energy II LLC. Franco-Nevada owns rights to precious metals across the world. Felix is now active in the Delaware Basin, where it is permitting wells.

Stories & Legends Series About Oklahoma Oilmen: Frank Phillips

November 11, 2016

Donald Trump Is President-Elect: What Now?

After an ugly, hard fought campaign, voters chose Republican Donald J. Trump as the next president of the United States. The win completely caught the pollsters and mainstream media by surprise. Many oil and gas industry executives were prepared for a Hillary Clinton administration, they now find themselves asking: What does a Trump administration mean for the industry? Will his economic policies help or hinder economic growth and favor oil and gas exploration? One sure winner is the coal industry which was punished by the Obama administration.

Trump counts among his advisers champions of fracking such as Harold Hamm, chairman and CEO of Continental Resources Inc. (NYSE: CLR). Hamm is considered a contender for U.S. energy secretary.

Anadarko plans to seek more oil, heavy liquids

Anadarko Petroleum intends to move away from natural gas and focus on drilling for oil in West Texas’ Delaware Basin, Colorado’s Denver-Julesburg Basin and the Gulf of Mexico, company executives said in it’s recent third-quarter conference call. Anadarko reported third-quarter losses of $830 million, down from $2.24 billion in the same period of last year. Anadarko announced Oct. 31 that it has a deal to sell its Carthage assets on the eastern border of Texas for more than $1 billion.

Since the end of the second quarter, the company also closed more than $500 million in asset sales through divesting assets in Elm Grove, Hearne, Hugoton and Ozona, Texas, and in Adams County, Colo. With the divestitures, the company exceeded its March goal of selling up to $3 billion worth of assets. This year, Anadarko closed $3.08 billion in sales and, with the Carthage sale, will eclipse $4 billion.

Royal Dutch Shell to sell Permian Basin acreage

Royal Dutch Shell has put up for sale two small properties in the Permian Basin, but it remains open to acquisition opportunities in West Texas, Shell Chief Financial Officer Simon Henry said on an analysts call Tuesday. “The Permian is the crown jewel. Not just in terms of value and quality of the asset but also the capability that is being developed there,” he said.

Värde Partners and Titanium Exploration Partners, LLC today announced they have acquired oil and gas assets in the STACK play in Oklahoma. Titanium will manage the STACK Acquisition assets on behalf of Värde, who provided the financing. The STACK Acquisition, which closed on September 9, 2016, consists of non-operated working interests covering approximately 3,600 net acres and 1,100 barrels of oil equivalent of daily production as of the effective date of the acquisition.

The assets consist of non-operated working interests in Blaine and surrounding counties, primarily alongside Continental Resources, Inc., one of the leading operators in the play.

Substantial damage after earthquake rattles Cushing

Dozens of buildings sustained “substantial damage” after a 5.0 magnitude earthquake struck an Oklahoma town that’s home to one of the world’s key oil hubs with almost 600 million barrels of stored crude, but officials said Monday that no damage has been reported at the oil terminal. It was only the sixth 5.0 magnitude or higher to strike Oklahoma since 1882, said George Choy, a geophysicist with the U.S. Geological Survey in Boulder, Colo. Three of those larger quakes occurred this year. The strongest ever recorded in Oklahoma was a 5.8 magnitude that hit Pawnee in September.

The quake struck at 7:44 p.m. Sunday and was felt as far away as Iowa, Illinois and Texas. The U.S. Geological Survey initially said Sunday’s quake was of magnitude 5.3 but later lowered the reading to 5.0. In response to Sunday’s earthquake near Cushing, Oklahoma’s oil and gas regulator says it plans to shut some disposal wells and reduce the volume of others. The Oklahoma Corporation Commission says its plan covers 700 sq. miles but does not say how many wells were affected; when a quake of similar magnitude hit the state in September, the agency ordered 37 wells shut over a 500 sq. mile area

US drillers attracted record amount of cash this year

US drilling companies, including Anadarko Petroleum and RSP Permian, have raised an unprecedented $28 billion so far this year from over 60 secondary stock offerings, beating out all but one other industry group. The capital helped companies build up their war chests for mergers and acquisitions.

OKLA Tax Collections on the Rise

State tax collections from oil and natural gas production are up for the first time in almost two years, Oklahoma Treasurer Ken Miller said Tuesday. October gross production collections of $35.1 million were above October 2015 collections by $2.9 million, or 8.9 percent. The last such increase was in December 2014, when receipts totaled $72.1 million.

Last Week’s Stories & Legends Series About Oklahoma Oilmen

November 4, 2016

Devon Reports Earnings

Devon Energy (DVN+3.1%) posted better than expected Q3 earnings and revenues, as it cut expenses and shifted to higher margin production. It expects cost savings to reach $1B this year. David A. Hager of Devon, noted that development programs delivered the best quarterly drillbit results in Devon’s 45-year history, with new wells reaching peak 30-day rates of nearly 2,000 BOE per day. These prolific drilling results were centered in our world-class STACK play, where oil production increased by nearly 40% year over year. DVN says it plans to increase its rig activity in the U.S. from five operated rigs running in Q3 to as many as 10 operated rigs by year end.

Earthquake Shakes Oklahoma

A magnitude 4.5 earthquake rocked north-central Oklahoma Tuesday night at 11:27 p.m. – the strongest and latest in a series of tremors that have been rattling the state for months. The US Geological Survey reports that the epicenter was near Pawnee, some 70 miles northeast of Oklahoma City. Pawnee Police say that preliminary reports show no significant damage. This was the fifth earthquake of the day in the state that registered at least a 2.0 magnitude, according to The Tulsa World.

GE Oil & Gas, Baker Hughes Plan Mega-Merger

Baker Hughes Inc. (NYSE: BHI), left at the altar in the failed merger with Halliburton Co. (NYSE: HAL), will combine with GE Oil & Gas, the companies said Oct. 31. GE (NYSE: GE) and Baker Hughes said they will merge into a new oilfield technology company with a value of $32 billion. As part of the deal, GE will give Baker Hughes shareholders’ a $7.4 billion sweetener, with shareholders receiving a special one-time cash dividend of $17.50 per share. The merger will create a “new Baker Hughes,” with GE owning a 62.5% majority interest in the company. Baker Hughes would hold the remaining 37.5% of the company.

Oxy’s $2 Billion Deal Doubles Permian Basin Holdings

Occidental Petroleum Corp. (NYSE: OXY) will take control of 35,000 net Delaware Basin acres and other Permian Basin interests in a $2 billion deal, the company said Oct. 31. Oxy said the company purchased producing and non-producing leasehold acreage in the Permian as well as interests in enhanced oil recovery (EOR) and CO2 properties and related infrastructure. The seller was undisclosed. In the Southern Delaware, Oxy added acreage in Reeves and Pecos counties, Texas, in areas where the company already holds working interests.

The acquisition:

Includes production of about 7,000 net barrels of oil equivalent per day (boe/d) (72% oil) from 68 horizontal wells;

Adds an inventory of about 700 gross horizontal drilling locations targeting the Wolfcamp A and B and Bone Spring as well as potential for additional zones; and Boosts the company’s leasehold Delaware position to nearly 59,000 acres

Wall Street Steps Up Investments in Permian Basin

West Texas is attracting new money from investors such as Blackstone Group, Apollo Global Management and WL Ross, which increasingly recognize the long-term potential of the region, particularly the Permian Basin. Contributing to the Permian’s allure for investors are advances in horizontal drilling and fracking, as well as the widespread presence of oilfield services companies, which help keep costs down.

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